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BUSINESS COMBINATIONS
 6 Months Ended
Dec. 23, 2012
BUSINESS COMBINATIONS

NOTE 16 – BUSINESS COMBINATIONS

On June 4, 2012 (“the acquisition date”), the Company acquired all of the outstanding common shares of Novellus in an all-stock transaction valued at approximately $3.0 billion. The results of Novellus’ operations have been included in the consolidated financial statements from the date of acquisition. Lam’s primary reasons for this acquisition were to complement existing product offerings and to provide opportunities for revenue and cost synergies. Novellus’ primary business focus is to develop, manufacture, sell and support equipment used in the fabrication of integrated circuits, commonly called semiconductors. Customers for this equipment manufacture semiconductors for sale or for incorporation in their own products, or provide semiconductor-manufacturing services to third parties. Novellus also develops, manufactures, sells and supports grinding, lapping and polishing equipment for a broad spectrum of industrial applications.

Consideration Transferred

The table below details the consideration transferred to acquire Novellus:

 

     Conversion      Estimated  

(in thousands, except per share amounts)

    Calculation      Fair Value  

Lam common stock issued at merger

      82,689      

Per share price of Lam common stock as of June 4, 2012

    $ 35.99       $ 2,975,977   
  

 

 

     

Estimated fair value of vested Lam equivalent restricted stock (1)

       $ 9,599   

Estimated fair value of vested Lam equivalent stock options (2)

         41,412   
     

 

 

  

Estimated purchase price consideration

       $ 3,026,988   
     

 

 

  

 

(1) The fair value of Lam Research equivalent restricted stock as of the acquisition date was estimated based upon the per share price of Lam Research common stock as of June 4, 2012, and giving effect to the exchange ratio of 1.125.
(2) The fair value of the Lam Research equivalent stock options as of the acquisition date was estimated using the Black-Scholes valuation model. Assumptions used are the same as those for acquired awards as disclosed in Note 11 of Notes to Condensed Consolidated Financial Statements.

Net Assets Acquired

The transaction has been accounted for using the acquisition method of accounting which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the assets acquired and liabilities assumed as of the acquisition date:

 

     June 4, 2012  
     (in thousands)  

Cash and investments

    $ 1,059,859   

Accounts receivable

      241,924   

Inventory

      309,213   

Other current assets

      56,314   

Property and equipment

      289,126   

Intangible assets

      1,219,100   

Goodwill

      1,277,121   

Other long-term assets

      35,826   
  

 

 

  

Total assets acquired

      4,488,483   

Accounts payable

      (83,028 ) 

Accrued expenses and other current liabilities

      (196,677 ) 

Deferred revenue

      (20,388 ) 

Debt

      (509,805 ) 

Other long-term liabilities

      (323,471 ) 

Convertible notes—equity component

      (328,126 ) 
  

 

 

  

Net assets acquired

    $ 3,026,988   
  

 

 

  

The goodwill recognized is attributable primarily to expected synergies and other benefits that the Company believes will result from combining the operations of Novellus with the operations of Lam. The $1.3 billion goodwill that was acquired is not expected to be deductible for income tax purposes. As of December 23, 2012, there were no changes in the recognized amounts of goodwill resulting from the acquisition of Novellus.

 

Preliminary Pre-Acquisition Contingencies Assumed

The Company evaluated and continues to evaluate pre-acquisition contingencies relating to Novellus that existed as of the acquisition date. The Company determined that certain of these pre-acquisition contingencies are probable in nature and estimable as of the acquisition date and, accordingly, has preliminarily recorded the best estimates for these contingencies as a part of the purchase price allocation for Novellus. The Company continues to gather information for and evaluate these pre-acquisition contingencies, primarily related to tax positions that were assumed from Novellus. If changes are made to the amounts recorded or additional pre-acquisition contingencies are identified during the remainder of the measurement period, such amounts will be included in the purchase price allocation during the measurement period and, subsequently, in the Company’s results of operations.