BREAKINGVIEWS-Dutch chip deal risks getting stuck in politics

By Yawen Chen

LONDON, March 13 (Reuters Breakingviews) - The Netherlands is no stranger to flashpoints concerning its semiconductor industry. In recent years, the Dutch government has restricted exports of lithography machines to China by $530 billion giant ASML ASML.AS, and recently invoked rarely-used powers to take control of Chinese-controlled domestic chipmaker Nexperia. A potential bidding war involving fast-growing $16 billion Dutch group BE Semiconductor Industries BESI.AS (BESI) will test how political things get when the buyer is from the United States.

BESI is widely seen as the market leader in advanced chip packaging. That strategic position is attracting takeover interest from U.S. equipment makers including $260 billion Lam Research LRCX.O, Reuters reported citing sources, sending the target's shares up about 10% on Friday. Meanwhile $270 billion Applied Materials AMAT.O, another U.S. group, will also be interested: last year it bought a 9% stake in BESI, making it the company’s largest shareholder.

The industrial logic is straightforward. Lam Research makes machines used to manufacture semiconductors, and owning BESI would give it a foothold in the fast-growing packaging segment, which analysts increasingly see as a bottleneck in the semiconductor supply chain. Traditional thermo-compression bonding – long used for 'stacking' chips to make them more powerful – is approaching its limits as memory chipmakers such as SK Hynix 000660.KS add ever more layers of high-bandwidth memory to power artificial intelligence systems. BESI is widely seen as the market leader in hybrid bonding, which connects chips with copper-to-copper links, enabling faster data transfer and lower power consumption.

Still, given its relevance in an AI-obsessed market, BESI is not exactly cheap. Even before today's bump the shares traded at 34 times expected 2027 earnings, according to Visible Alpha estimates - a richer multiple than Lam Research’s 27 times and ASML’s 31 times. BESI's revenue will admittedly grow more than twice as fast as those rivals in coming years, while operating margins could exceed both in 2026, according to Visible Alpha data. But even if it generated the forecast 955 million euros of operating profit in 2030, that's only a 4% return assuming any buyer offers a 30% premium - less than half BESI's 9% weighted average cost of capital as estimated by Morningstar.

Politics looks the biggest challenge, though. With only a handful of global players – and even fewer in Europe – the sector carries obvious strategic weight. Allowing BESI to be acquired by a U.S. firm may make little sense geopolitically given the Netherlands' role as Europe's lone semiconductor equipment champion, Morningstar analyst Javier Correonero reckons. That's especially the case given recent tensions between Washington and Brussels over Greenland.

For its part, BESI pointedly said on Friday that it remains committed to its strategy as an independent company. In this case, that may not be merely M&A defence-speak.

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CONTEXT NEWS

Amsterdam-listed chip equipment maker BE Semiconductor Industries has been fielding takeover interest, Reuters reported on March 12, as demand for its chip-packaging technology becomes more critical for semiconductor equipment makers.

U.S. chip-equipment maker Lam Research is among the suitors that have held discussions with the Dutch company recently, the Reuters report said citing unnamed sources. Other potentially interested parties include equipment manufacturer Applied Materials, which acquired a 9% stake in BESI in April last year and became its largest shareholder.

BESI said on March 13 that the company does not respond to market rumours, and that it is “fully committed to the execution of its strategic plan to enhance shareholder value as an independent company”.

BESI’s shares rose 11% as of 1014 GMT on March 13.