Applied Materials to buy Etec

Applied Materials (Nasdaq: AMAT) plans to buy Etec Systems (Nasdaq: ETEC) for more than 14 million shares.

After market close Wednesday, Applied unveiled a proposal to issue 0.649 shares of its stock for every share of Etec, whose systems produce masks for printing circuit patterns on chip manufacturing wafers. Etec also makes imaging systems used for producing electronic interconnects.

Based on about 21.6 million shares outstanding for Etec, Applied would issue almost 14.02 million shares in the deal. At Wednesday's closing prices, the agreement would be valued at roughly $1.78 billion, or about a 66 percent premium for Etec.

The deal, to be accounted as a tax-free pooling of interests, must be approved by Etec shareholders and government regulators.

Executives from both companies said Etec's product line would fit with Applied, the world's largest maker of chip manufacturing equipment.

"By combining our expertise in process technology and metrology with the leading supplier of advanced mask pattern generation equipment, we have the opportunity to advance mask making technology," said James C. Morgan, chairman and CEO of Applied. "The synergies between mask patterning technology and our etch and metrology and inspection business units have the potential to expand opportunities in all of these complementary technologies."

Etec lost $700,000 on revenue of $56.7 million, with gross margin of 39.8 percent, in its fiscal first quarter ended Oct. 31. The company in fiscal 1999 earned $1 million on sales of $237.2 million, compared to a profit of $46.8 million on revenue of $288.3 million in fiscal 1998.

Shares of Applied fell in afterhours trading to 124, down from 127 1/16 at the close of Wednesday's regular session. Etec saw afterhours trading of 75, far above its close of 49 7/8.>