KLA-Tencor And Lam Research Terminate Proposed Merger; Credit Suisse Not Surprised

KLA-Tencor Corp (NASDAQ: KLAC) announced after Wednesday's market close that it has agreed to terminate its proposed merger agreement with Lam Research Corporation (NASDAQ: LRCX).

The U.S. Department of Justice (DoJ) told KLA-Tencor that it won't continue with a consent decree that the parties had been negotiating, which led to the company terminating the merger agreement.

Farhan Ahmad of Credit Suisse commented in a research report that the termination was "not a surprise" to him and investors had also priced in a low likelihood of the deal closing.

Ahmad added that KLA's stock is expected to "trough" between the $67 to $68 level before reaching $72 "fairly soon" and that any volatility in KLA's stock could represent a good buying opportunity.

KLA and Lam Research indicated they will continue to work together on new products that they have worked on over the past year. Assuming revenues are shared equally, the analyst estimates this could represent an incremental revenue growth of $300 million for both companies over the next three years.

Bottom line, KLA remains one of Ahmad's top picks for the bottom half of 2016, as it is "one of the cheapest stocks" within his universe of semiconductor stocks he covers.

At Last Check ...

• KLA was down 0.72 percent at $70.70.
• Lam Research was up 3.51 percent at $99.55.

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