Mark LaPedus, 11/18/2010 3:45 AM EST

SAN JOSE, Calif. – In a major move in the ATE sector, Verigy Inc. has acquired rival LTX-Credence Corp.

The combined company will be called Verigy. Verigy itself was formerly part of Agilent Technologies Inc. Agilent spun-out the ATE unit several years ago, thereby forming Verigy. Several years ago, LTX Corp. bought ATE rival Credence Systems Corp., forming LTX-Credence. 

With LTX-Credence, Verigy expands its efforts in the logic, mixed-signal and analog ATE markets. Verigy is strong in logic and memory test. In logic, it has a large presence in the subcontractor community. In memory, Verigy’s customers include Samsung, SanDisk and others.

LTX-Credence is strong in mixed-signal, and, to some degree, logic. LTX-Credence’s largest customer is Texas Instruments Inc. The combined entities will compete against Advantest, Teradyne, among others.

Meanwhile, under the terms, Verigy president and COO, Jorge Titinger, and LTX-Credence president and CEO, David Tacelli, will serve as co-CEOs of the new company, which will be headquartered in Singapore with U.S. headquarters in Cupertino, Calif.

Verigy chairman and CEO, Keith Barnes, will continue as the chairman of the board of directors, which will be comprised of 12 members, seven designated by Verigy and five by LTX-Credence.

Furthermore, to facilitate the leadership change, Keith Barnes will transition from Verigy CEO to Verigy chairman of the board of directors as of Dec. 31, 2010, and Jorge Titinger will be promoted to Verigy CEO and president.

“The two companies share a long legacy of innovation in test solutions that meet customers’ technology needs and enable them to maximize profitability and competitiveness,” said Barnes in a statement. “By joining forces, we expect the combined scale to strengthen our global presence, realize significant synergies and provide substantial benefits to our customers, shareholders and employees.”

Under the terms of the agreement, the transaction will either be effected through a reorganization where Verigy and LTX-Credence would be wholly owned subsidiaries of Holdco, a newly created subsidiary, or through a merger where LTX-Credence would become a wholly owned subsidiary of Verigy.

LTX-Credence shareholders will receive a fixed exchange ratio of 0.96 shares of Verigy stock or Holdco stock for each share of LTX-Credence stock. Upon closing, Verigy or Holdco, as applicable, will issue approximately 49 million shares on a fully diluted basis to complete the transaction. At that time, Verigy and LTX-Credence shareholders will own approximately 56 percent and 44 percent, respectively, of the combined company.

The combined company also expects to realize substantial synergies within one year of the close of the deal, with annual cost savings expected to reach at least $25 million, primarily from increased efficiencies in manufacturing and reduced operating expenses.

The transaction is subject to the approval of shareholders from both companies as well as other customary closing conditions and regulatory approvals. The companies expect the transaction to close in the first half of calendar 2011.

Shares of the combined company will trade on the NASDAQ under the symbol “VRGY.” Morgan Stanley acted as financial advisor and Wilson Sonsini Goodrich & Rosati acted as legal counsel to Verigy. J.P. Morgan acted as financial advisor and WilmerHale acted as legal counsel to LTX-Credence.

Verigy also announced today its board of directors has authorized an odd lot program that will result in the purchase of approximately 2.3 million shares, or 4 percent of Verigy’s current outstanding shares, from shareholders holding less than 100 shares of the combined company following the transaction.

This is expected to simplify the combined company’s capital structure. In addition, Verigy’s board has authorized an annual stock repurchase program of up to 10 percent of the Verigy’s current outstanding shares, effective for approximately 12 months following the transaction. The repurchases are expected to be funded from available cash and short-term investments. The odd lot repurchase and stock repurchase program are both subject to shareholder approval at Verigy’s next shareholder meeting.

Verigy presentation here: cnsmprod_014476

source eetimes