Cowen Bullish on Lam Research/KLA-Tencor Deal Amid Delay; Affirms Lam Research at 'Outperform' (LRCX)
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Cowen and Company affirms Lam Research (Nasdaq: LRCX) at Outperform with a price target of $95 following news of a delay in closing its deal with KLA-Tencor.
Analyst Tim Arcuri commented today:
Time kills M&A deals and most consummated deals don't extend much beyond 12mos. Having said that, we continue to see the holdup here related to procedural remedies and KLAC's status as a "process neutral" third party more than anything else. This is wholly unlike AMAT/TEL which was largely killed by customer pushback and contained massive cost synergies that made it more all or nothing from an earnings accretion perspective. From the LRCX side, we would much rather see the deal happen but the company is also earning a ton of money on its own with a long runway for growth, albeit hurt a little in a EUV world.
From the KLAC side, we have long said that LRCX is getting a good deal given where KLAC is cyclically and with the new Gen5 tool. KLAC could negotiate for a better price post 10/20, but the ship is already sailing and the shareholder base is in major transition. Ultimately, LRCX still really hasn't re-rated higher for this deal so it's hard to argue much downside even if the deal broke (although it makes us a little less excited about the stock medium/longterm). KLAC would, by our math, trade mid $70's on its own, so again, hard to argue for much downside here either. Net/net, we still see no reason why this should not close but on standalone basis we value KLAC at $76 and LRCX at $95, both of which look attractive at today's price.
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