(Bloomberg) -- Lam Research Corp. said its $10.6 billion acquisition of KLA-Tencor Corp. is facing regulatory hurdles and probably won't get approval before the planned closing date in October.
The companies continue to hold discussions with the U.S. Department of Justice and competition-related authorities in China, Korea and Japan, Lam Research said Wednesday in a statement. Those countries are home to their largest customers. The announcement sent the stocks tumbling.
The delays added to concern that tie-ups between chip-equipment makers won't be cleared by government agencies who are wary that a further shrinking of the number of suppliers to some of their most important companies will hurt pricing. Applied Materials Inc. was last year forced to withdraw its bid for Tokyo Electron Ltd. after opposition from the U.S. Department of Justice.
“The companies continue to believe the transaction is pro-competitive and beneficial to their respective customers, employees and suppliers,” Lam Research said in the statement. “However, it has become more likely that obtaining regulatory clearances in one or more of the remaining jurisdictions may extend beyond October 20, 2016, the outside date set forth in the merger agreement.”
Lam and KLA are among the largest makers of equipment that's used to manufacture chips. Lam's machines perform functions in the initial stages of making semiconductors while KLA equipment monitors that stages in manufacturing are completed properly. Their largest customers include South Korea's Samsung Electronics Co. and the U.S.'s Intel Corp. Chinese approval is important because it's the largest market for chips and has ambitions to build domestic supply of the electronic components.
Shares of Fremont, California-based Lam dropped 4.5 percent to $89.11 at the close in New York. KLA-Tencor fell 10 percent, its steepest one-day decline since November 2014.
To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net. To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Alistair Barr
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