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Tokyo Electron shares soar on US merger deal

Tokyo -Tokyo Electron shares soared Wednesday on news of a multi-billion dollar merger between the Japanese chip and panel giant and US-based rival Applied Materials.

Investors cheered the corporate marriage announced late Tuesday to create a $29bn firm, which the companies said would slash costs and better meet customer needs on the back of surging demand for mobile gadgets, such as smartphones and tablet computers.

The deal is scheduled to close next year pending regulatory approval, they said.

Tokyo Electron's stock finished 13.19% higher to ¥5 490 ($57) on Japan's biggest stock exchange, with the US firm's shares up about 9.0% on Wall Street overnight.

However, the merger appeared more like a takeover by Applied Materials with the US firm's shareholders to own about 68 percent of the new company, while 32% would go to Tokyo Electron stockholders.

The merged firm's headquarters will be located both in Santa Clara, California and Tokyo, but it will be incorporated in the Netherlands, reportedly part of a bid to shrink its tax bill.

Efforts to paint the deal as a merger of equals may have been aimed at selling the tie-up in Japan where foreign takeovers of domestic firms - particularly a major corporate name such as Tokyo Electron - are extremely rare.

The rivals, which produce tools to make semiconductors and display panels, count US-based chip giant Intel and South Korea's Samsung as customers.

Nomura Securities analyst Tetsuya Wadaki said the merger could give both companies more muscle in negotiating deals with clients.

Semiconductor production equipment makers "have been seeking to change their business model to one based on services/maintenance or the collection of fees, from one based only on the sale of equipment", Wadaki told Dow Jones Newswires.

"The burden of negotiating this change to the sales platform with customers has become too great for any one company to bear on its own."


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