PORTLAND, Ore. & MIDDLEFIELD, Conn., April 3, 2009 -- Electro Scientific Industries Inc. (ESI) and Zygo Corp. announced Thursday that they have terminated their stock-swap merger plans.
Portland-based ESI is a provider of photonic and laser systems to the microelectronics industry. Zygo, located in Middlefield, develops high-precision metrology products and optical systems for the semiconductor capital equipment and industrial markets.
Under the agreement announced in October (See ESI Acquiring Zygo), Zygo shareholders would have received 1.0233 shares of ESI stock for each share of their stock in a tax-free transaction, with Zygo shareholders ultimately receiving a 40 percent ownership stake in the combined company.
At the time, the deal was estimated to be worth $173 million, but the weak market and decline in ESI's stock price over the past five months had reduced it by about $70 million. Zygo's board withdrew its recommendation for the merger in January after ESI posted a disappointing $29.3 million net loss for the third quarter of 2009.
In announcing the deal, the CEOs of both companies cited the complementary nature of their businesses as a compelling reason to merge, saying the combination would create a premier photonic microengineering and metrology systems company.
“As a result of the complementary nature of the technologies, there is little product or technical overlap, reducing risks typically associated with integration," said Nick Konidaris, president and CEO of ESI, in the October statement. "In addition, this merger accelerates our existing growth strategy by extending our presence into adjacent markets in the microelectronics, medical, industrial, security and defense sectors. Finally, combining the resources of these two industry-leading companies will provide the size and scale to make strategic investments and to better compete in today’s challenging international markets.”
As part of the termination, ESI received a break-up fee of $5.4 million relating to the Zygo board's merger recommendation withdrawal. Zygo will have to pay an additional $1.2 million if it sells its business to another company within the next six months.
In Thursday's release, both Konidaris and Zygo CEO Bruce Robinson expressed hope that the two companies would be able to find ways to work together in the future.
For more information, visit: www.esi.com or www.zygo.com
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