Veeco Instruments, FEI to merge


Woodbury, N.Y. and Hillsboro, Ore . - Veeco Instruments Inc . and FEI Co . announced July 12 the signing of a definitive merger agreement to combine the companies. FEI will become a wholly owned subsidiary of Veeco, and Veeco will be renamed Veeco FEI Inc. The company will continue to trade on the Nasdaq market under the ticker symbol VECO.

Pursuant to the agreement, unanimously approved by the boards of directors of both companies, FEI stockholders will receive 1.355 shares of Veeco common stock for each share of FEI they own. Based upon FEI's approximately 32 million diluted shares outstanding, the FEI stockholders will receive approximately 44 million Veeco FEI shares with a current value of approximately $1 billion. The merger, which will be accounted for using the purchase method, is intended to be tax-free to FEI stockholders, and is expected to close during the fourth quarter of 2002 following approval of each company's stockholders, certain regulatory approvals and other customary closing conditions.

The transaction is expected to be accretive to Veeco's current 2003 analyst consensus estimates on a pro-forma basis. The transaction is expected to be dilutive to Veeco on a GAAP basis when including the expected impact of purchase accounting on amortization expense, in-process R&D write-off, inventory capitalization and SAB 101 deferred revenue recognition. Veeco FEI management will provide further information on the expected impact of purchase accounting on the combined company's financial statements upon completion of the merger. Veeco and FEI managements currently anticipate operating synergies of approximately $8-10 million on an annualized basis resulting from integration of the companies' sales and support networks, supplier management, and manufacturing and administrative efficiencies.

Vahe A. Sarkissian, FEI's chairman, president, and ceo, will become chairman of the board and chief strategy officer of Veeco FEI. Edward H. Braun, Veeco's chairman, president, and ceo, will remain ceo and president. Veeco FEI's Board of Directors will have 13 members, seven of whom are current members of Veeco's Board (including Mr. Braun), five of whom are current members of FEI's Board (including Mr. Sarkissian), and one of whom will be designated by Philips Business Electronics International B.V., a significant stockholder of FEI. John F. Rein, Jr., Veeco's evp and cfo will retain his position as cfo of the combined company.

Veeco FEI's corporate headquarters will be located in Woodbury, N.Y., the current Veeco headquarters, and FEI's current headquarters in Hillsboro, Ore. will remain a significant facility for Veeco FEI as a center of research and development and manufacturing. Veeco FEI will have approximately 2,900 employees at its key facilities in North America, Europe, Japan, and the Asia-Pacific region.

In discussing the planned merger, Mr. Sarkissian said, ''We believe this merger has compelling strategic value. Together, we join the ranks of top tier companies with the critical mass to create more value for our customers and stockholders. We intend to leverage our enriched technology portfolio to accelerate growth by delivering broader product offerings to our customers and building new markets. Additionally, our combined channels should also enhance growth opportunities and achieve new operating efficiencies. The new Veeco FEI will be far better positioned to capitalize on the economic upturn, with a combined management team that has a proven track record of building companies with strong revenue and profit growth.''

Mr. Braun commented, ''The combination of Veeco and FEI creates a leading metrology and process equipment company, providing solutions for growth opportunities in semiconductor, data storage, telecom/wireless, and scientific research markets. Based on combined 2001 sales of $825 million, together we become the sixth largest U.S. semiconductor equipment company and the third largest U.S. supplier of metrology equipment. We believe that FEI is an excellent partner for Veeco, with leadership in complementary technology products, a track record of profitability, a solid balance sheet, and a strong management team. The merger should benefit our customers through an enhanced Veeco FEI technology portfolio, a stronger research and development effort and improved global support.''

Each company expects to meet guidance provided for the second quarter of 2002. Veeco's previous guidance for the second quarter of 2002 was: revenues of between $75-80 million, bookings greater than $70 million, and pro-forma earnings per share approximating break-even (excluding amortization expense). FEI's previous guidance for the second quarter of 2002 was: revenues of approximately $80 million, bookings of approximately $75 million and cash earnings per share of approximately $0.15. Veeco and FEI are currently expected to report their second quarter results separately on July 29th.

Veeco, with 2001 revenues of $449 million, is a worldwide supplier of process equipment and metrology tools for the telecommunications/ wireless, data storage, semiconductor, and research markets.

FEI, with 2001 revenues of $376 million, is a supplier of 3D Structural Process Management solutions to semiconductor, data storage, structural biology, and industrial companies. The company's Dual-Beam and single column focused ion and electron beam products allow advanced three-dimensional metrology, device editing, trimming, and structural analysis for management of sub-micron structures.

Control Engineering Daily News Desk
Gary A. Mintchell, senior editor

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