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MKS Instruments Acquires Photon For C$387M, Boost Technology Solutions

MKS Instruments (MKSI) agreed to acquire Photon Control (PHO) for approximately C$387 million. The latter is a manufacturer of fiber-optic measurement solutions used in semiconductor wafer fabrication. Following the announcement, shares of MKSI fell by as much as 4.8%, while shares of PHO spiked 16.7% on May 10.

The semiconductor solutions provider is making this acquisition for C$3.60 per share in an all-cash deal. The transaction is expected to close in Q3 2021, subject to customary closing conditions, including approval by Photon Control security holders.

The deal will expand MKS Instruments’ optical sensors offerings and increase its presence in the semiconductor market. These sensors are used in temperature control for critical etch and deposition applications in semiconductor wafer fabrication.

Post the closure of the deal, the Photon Control buyout is expected to be accretive to the company’s adjusted net earnings within the first year of operations. 

MKS Instruments CEO said, “We believe the Photon Control acquisition will help us deliver on one of our long-term strategic objectives, which is to broaden our portfolio of key technologies to better serve our customers. We anticipate the acquisition will further advance the MKS strategy to enhance our Surround the Chamber offering by adding optical sensors for temperature control for critical etch and deposition applications in semiconductor wafer fabrication. In addition, Photon Control is a strong strategic fit with similar culture and vision to MKS.” (See MKS Instruments stock analysis on TipRanks)

On May 27, MKS Instruments announced its Q1 results. The company’s top-line jumped 30% year-on-year to $694 million, beating consensus estimates of $652.2 million. Also, earnings increased 9.4% to $2.56 per share, outpacing the consensus estimates of $2.20 per share.

Following the deal announcement, Rosenblatt Securities analyst Scott Graham maintained the stock’s price target of $265 (44.5% upside potential) and a Buy rating.

Graham commented, “Photon Control products add to MKSI’s offering to wafer fab customers. We initially estimate the deal will be 3% accretive to GAAP earnings.”

Consensus among analysts is that MKS Instruments is a Strong Buy based on 6 Buys and 1 Hold. The average analyst price target of $230.57 implies 32.2% upside potential. That’s after the stock has seen a gain of around 73.5% over the past year.

Furthermore, TipRanks data shows that financial blogger opinions are 100% Bullish on MKS Instruments, compared to a sector average of 68%.

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