By Akanksha Rana
(Reuters) - U.S. chip gear maker Applied Materials Inc (O:AMAT) on Monday agreed to buy Japan's Kokusai Electric for $2.2 billion in cash from investment firm KKR & Co Inc (N:KKR), as it bets on rising demand for memory chips.
While a decline in demand from smartphone makers has hurt memory chip prices, analysts expect the market to rebound as data center customers ramp up operations, coupled with higher demand for chips used in artificial intelligence-based devices and 5G phones.
Shares of the world's biggest maker of chipmaking equipment were up 3.3% at $46.40 in trading before the bell.
The deal comes less than two years after KKR took control of Hitachi Kokusai in a $2.2 billion deal. The Financial Times had reported in February that the private equity firm was in talks with two Chinese buyers for the "full or partial" sale of the company.
Kokusai, which counts Samsung (KS:005930), SK Hynix (KS:000660), Toshiba (T:6502) and Micron (O:MU) among its top customers, reported revenue of $1.24 billion as of March 2018.
"AMAT needs to acquire a $1B+ revenue business to make a difference to its revenue and earnings, so this makes sense," Cowen and Co analysts wrote in a client note.
The deal would push the U.S. company's share of the chipmaking equipment market to above 20% from 18%, according to the Nikkei, which had earlier reported on the deal.
Applied Materials last month forecast third-quarter profit and revenue above estimates after reporting better-than-expected quarterly results.
It expects to use a combination of cash and debt to fund the deal, which is expected to close within a year and immediately add to its adjusted earnings per share.
Goldman Sachs & Co (NYSE:GS) LLC served as exclusive financial adviser, and Hogan Lovells and Cleary Gottlieb Steen & Hamilton LLP served as legal counsel for Applied Materials.