MATTSON TECHNOLOGY INC
425, 2000-06-28
SPECIAL INDUSTRY MACHINERY, NEC
Previous: MATTSON TECHNOLOGY INC, 425, 2000-06-28
Next: MATTSON TECHNOLOGY INC, 425, 2000-06-28



<PAGE>   1
                                               Filed by Mattson Technology, Inc.
                                                      Pursuant to Rule 425 under
                                                      the Securities Act of 1933
                                                    and deemed filed pursuant to
                                                   Rule 14a-12 of the Securities
                                                            Exchange Act of 1934
                                       Subject Company: Mattson Technology, Inc.
                                                  Commission File No.: 000-24838


                           ACQUISITION CONFERENCE CALL

OPERATOR:

Read Safe Harbor statement, Rule 425 statement (attached), and mention that a
press release was put on the wire and that it is also available on our website
along with some presentation foils. Editors can also contact Peter Brown at
(510) 492-5923 for press information.

RULE 425 STATEMENT

Mattson plans to file a Registration Statement on Form S-4 in connection with
the transactions and both Mattson and CFM expect to mail a Proxy
Statement/Prospectus to their respective stockholders containing information
about the transactions. Investors are urged to read the Registration Statement
and the Proxy Statement/Prospectuses carefully when they are available. The
Registration Statement and the Proxy Statements/Prospectuses will contain
important information about Mattson, CFM, the STEAG business being combined with
Mattson and CFM and related matters. Investors and security holders will be able
to obtain free copies of these documents through the web site maintained by the
U.S. Securities and Exchange Commission ("SEC") at http://www.sec.gov. Copies of
the registration statement and Mattson's Proxy Statement/Prospectus may be
obtained free of charge from Mattson.


INTRODUCTION

Good morning, and welcome to Mattson Technology's conference call. I am Brad
Mattson, CEO of Mattson Technology, and with me is our CFO, Brian McDonald.
Thank you for joining us, for some of you, on very short notice. We are here
today to discuss some exciting news. We've announced today that Mattson
Technology has entered into a definitive agreement to acquire the Semiconductor
Equipment Division of STEAG Electronic Systems. This includes their RTP, CVD,
Copper, and Wet Processing Groups, but excludes their optical storage and
photomask operations. Also, we have simultaneously entered into an agreement to
acquire CFM Technologies as well. Due to the necessary approval requirements,
it's estimated that the transactions will not be completed until early January
2001.

I'm sure this announcement creates many questions. I'd like to address them by
first going over the strategy behind these acquisitions. This overview will
cover the general reasons for doing this deal. Then Brian will go over the
transaction details. I'll finish with a more detailed discussion on the various
product groups and the effect on our corporate structure. Then we'll open it up
for questions.

Now, let me start by addressing the big question....WHY?

CRITICAL MASS
<PAGE>   2

First of all, SIZE MATTERS. I know I've been a vocal opponent to the "Critical
Mass" argument. Mattson has been all about trying to prove that we can provide
better support, even on a global basis, better R&D leading to better products,
and financial stability, even though we are 40 times smaller than Applied
Materials. I believe we've made progress to prove those points, and it's been
reflected in our growth rates. But "SIZE DOES MATTER". The semiconductor
equipment industry is consolidating, and our customers want fewer, higher
quality suppliers. Recently, customers have been asking Mattson to offer more
capability, and we need to respond to those requests. The semiconductor capital
equipment industry is maturing and the larger companies in our arena are gaining
a larger percentage of the total revenue. Sixty-nine percent of all equipment
purchases made in 1999 were made with the top 10 equipment suppliers, and this
consolidation trend continues.

There is a reason for this. With new fabs costing $2 billion dollars and
technologies changing more frequently, chipmakers want to REDUCE THEIR RISK.
It's the perception, and... often the reality of risk that is the driving force
in this consolidation. Fewer and higher quality suppliers can reduce this risk.
The estimated combined revenues for the three individual companies for 2000
would be approximately $460 to $500 million, or roughly 5 times greater than
Mattson Technology's fiscal 1999 revenues. After the deal closes, Mattson should
become one of the 15 largest equipment suppliers in the world...immediately!!
We believe this means we will have the critical mass necessary to satisfy our
customers. AND, we will have the capability to meet a much broader set of their
needs. This will be very exciting.

I believe everyone knows the advantages of Critical Mass, but I'll still review
one more area in detail as it illustrates one of the key benefits of this
merger. Sales, as we all know, is a key issue. In this deal, the new Mattson
will have a leadership position in multiple product lines (more about that
latter). AND, we will be able offer these products with support resources in all
significant region of the world. For example, in Taiwan, one of the fastest
growing regions of the world, Mattson will now have more than 100 employees. Our
ability to sell and support our systems to all our key customers in this region
will be greatly enhanced. In this tight labor market, we couldn't even hope to
hire all these people. So critical mass brings the sales and service staffs we
need to grow the business with our customers.

7 STRATEGIC POINTS - MULTI-PRODUCTS AND TRULY GLOBAL OPS

Now, to my next point. For years, Mattson Technology has had 7 strategic
initiatives that we have identified as the Critical Success Factors in our
industry. They have been our "unfair advantage". We

<PAGE>   3

feel that by simply executing these initiatives...as difficult as that is to
do...At least, it's all that's necessary to become a leading company in this
industry. So we focus on them. Over the years we've had success in several of
these initiatives, such as providing systems with the best technology and
highest productivity. But this merger is a major step forward in the process,
completing two key initiatives and creating a step function improvement in a
third. One initiative is to become a multi-product, multi-technology company. We
define success in this area as achieving #1 or #2 market share in more than one
product line or technology. A second is to become a truly global company. We
define global in terms of how we act with people, practices and organization.
The third is to become the Vendor of Choice at the top 20 Semiconductor
manufacturers in the world. We measure that > 50% market share at that account.

MULTI-PRODUCT, MULTI-TECHNOLOGY COMPANY

Let's first look at the multi-product metric. When this transaction is
completed, Mattson will be a leader in 3 major market segments. Mattson already
holds the industry's No. 1 position in Strip systems. The new company will be
No. 2 in RTP (Rapid Thermal Processing) so we will have achieved our
multi-product objective. We also achieve our multi-technology goal as Strip is
based on Plasma technology, while RTP is based purely on thermal technology.

An additional benefit is that with the joint strengths of CFM Technology and
STEAG, we will also become a top 5 supplier of wet processing systems. And with
reasonable success in the coming year, we have a good chance to become the #1or
#2 supplier of wet processing system outside of Japan.

Achieving the No. 1 or 2 equipment supplier positions in multiple product
segments is a unique accomplishment. To our knowledge, only 2 other companies in
the front-end equipment space have achieved this goal, Applied and TEL. We are
in very good company. We will now have a fantastic opportunity to enhance the
relationships with our customers. As wafers are processed to create integrated
circuits, they have to go through over 200 process steps. The new Mattson
Technology will have the product offerings to provide solutions for over 80
steps or more than 40 PERCENT OF THE PROCESS STEPS. Only a small elite group of
companies provide solutions for this many steps in the manufacturing process.
Many of these steps are inter-related and the new Mattson technology will really
have a chance to provide "Total Solutions", something only one other company
claims to do. The other advantage of this broad product base is the TAM or Total
Available Market. All totaled, Mattson will now address a TAM of more than $3
billion in 2000 and growing to more than $5 billion by 2002.
<PAGE>   4

TRULY GLOBAL OPERATIONS

The second key initiative is to become a truly Global Company. Mattson has
always had success selling overseas, but this merger makes us truly global in
many ways. There will be an almost balanced number of employees between the US,
Europe, and the Pacific Rim, and we will have manufacturing operations in 2
regions with plans to manufacture in the third. Our sales will continue to be
balance around the world to almost exactly match the market opportunity whether
it is in the Pacific Rim, Europe, or the US. Finally, our management team will
be very international. Of the top 26 managers in the future combined Company,
only 10 will be from the US, 8 will be from Europe, and 8 from Asia-Pacific. Our
vision is to create a company that utilizes the best people from around the
world, taking advantage of the diversity and strengths of each culture. It's
trite to say, but we DO want to think globally and act locally in each region we
serve. We believe this management team is more global than any company in the
top 15 with which we will now compete.

VENDOR OF CHOICE

Finally, one of our most often used metrics at Mattson is the Vendor of Choice.
Historically, the top 20 semiconductor companies buy 70-80% of all capital
equipment. We must be well positioned with these top 20 accounts to succeed. You
might be aware that Mattson uses a "Vendor of Choice" metric to measure the
quality of these relationships. All three companies in this merger have
significant relationships with these top customers. For example, Mattson had has
become the vendor of choice at 10 out of the top 20 with our Aspen Strip system.
The combined company will now have over 2000 systems installed around the world
and have equipment working at virtually all of top 20 customers!! By combining
the market penetration and success of all the product lines, we find that the
combined entity will be a Vendor of Choice in at least one product line in 17 of
the top 20 companies. This is an incredible opportunity. Independently, this
could have taken 4-6 years if we accomplished it at all. AND, there are at least
8 of the top 20 firms where we will be the Vendor of Choice in MORE THAN ONE
product line. Of course where this isn't the case, we will want to use strength
in one product line to help any other product line penetrate these key accounts.
We still have to analyze the situation, account by account, but there is the
possibility we will have several customers that could purchase more than $50M in
products from the combined company. Since Mattson's previous record order was ~
$10M, you can really see that SIZE DOES MATTER!! This Vendor of Choice
improvement is a major asset of the new company.
<PAGE>   5

SUMMARY

There are a lot more reasons this is a good deal, but we'll save some of that
for later. To recap at this point, I want to summarize by saying that the new
Mattson Technology will have significant advantages:


        -       The size and critical mass necessary to meet our customers
                needs. We become one of the top 15 equipment companies in the
                world.

        -       We achieve true multi-product, multi-technology capability,
                becoming a market leader in 2 major market segment - Dry Strip
                and RTP, and have a significant opportunity to gain market share
                in a third, Wet Processing.

        -       And ...we strengthened our position at the top 20 equipment
                buyers. In fact, we will be vendor of choice in at least one
                product line in 17 out of the 20.

This IS a very good deal. Now I'll turn the call over to Brian to discuss the
legal and accounting aspects of the transaction as well as some limited
financial estimates. Brian?

BRIAN MCDONALD:

Thank you, Brad

Let me start by summarizing the financial facts associated with the transaction:

        -       The deal should become effective in early January, 2001. All of
                the companies will continue to operate as independent financial
                operations until the final closing date.

        -       The transaction will be structured as a purchase accounting
                transaction for both companies being acquired. The purchase
                details are as follows:

        -       Steag - Shares to be issued are 11,850,000 - this will represent
                approximately 32% ownership in the new combined company.

        -       CFMT technology - Shares to be issued are capped at 4,112,000
                shares, which translates into an exchange ratio of approximately
                0.5223 Mattson shares for every 1 CFMT share of stock. This will
                represent approximately 12% ownership in the new combined
                company (add for executive options).

        -       Existing Mattson technology shareholders will maintain
                approximately 56% ownership in the new combined company.

        -       The purchase accounting transaction will result in a purchase
                price in excess of net assets acquired. This number is expected
                to be in the $(400)M - $(450)M dollar range based on the current
                market price of Mattson stock and the current value of the net
                assets. The

<PAGE>   6

                allocation of the purchase price among net assets acquired,
                in-process R&D, goodwill and intangibles will be determined
                using independent appraisers. It is anticipated that the
                Goodwill and other intangibles will be amortized over a period
                of 3 to 7 years.

        -       The combined effects of the transaction are expected to produce
                accretive results of in the first full year of combined
                operations before the effects of the amortization of the
                goodwill and other intangibles and the write-off of the
                in-process R&D and other merger related expenses.

Now I would like to discuss how the merger will effect our current business
results. As we mentioned in the press release the combined revenues in year 2001
are expected to be around $730 million. The Wet Process Group will have a
positive impact on revenues, but will initially have an adverse impact on gross
margins. It is expected that the new combined gross margins will run 10% - 12%
below our current model of 55%. Clearly, the Wet process margins will be an area
of opportunity to leverage the synergies of the acquisition and focus our margin
improvement efforts. Due to the synergies of the merger it is expected that the
overall operating expenses will improve by approximately 2% from our current
financial model of 35%. Research and Development expenses are projected to run
at our model of 13% and SG&A expenses below model at 20%. The new effective tax
rate for the combined company is expected to be around 30% for the full year
before adjustments in goodwill and other one time deal expenses. As a result of
the above, the expected EPS for the new combined company is expected to be
accretive from the current Mattson estimates before amortized Goodwill and other
intangibles and in-process R&D write-offs and other merger related expenses.

We expect to close the transaction in a strong financial position, with total
cash balances of approximately $150 million and less than $20 million in total
debt. Based on the current profit expectations I would expect a favorable
cash flow to further enhance the Balance sheet.

With that I'd like to turn the call back over to Brad.



<PAGE>   7

BRAD MATTSON:

Thanks Brian. I'd now like to discuss some of the organizational and operational
aspects of the combined Company.

Although we can not begin to integrate these entities until the transaction is
finalized in January 2001, we have already started to prepare the management
team, organizational structures, and product roadmaps to facilitate this
integration. It is our plan to move as quickly as possible to integrate, while
keeping focus on our current business to ensure customer satisfaction is not
lost during this transitional period. Our priorities are near term business and
customer satisfaction first.

THE PRODUCT DIVISIONS & PIPELINE

Let's first discuss the organizational issues. We will be organizing the people,
products and assets into 3 major Product Divisions, and a Corporate Pipeline
organization. One product group is the Thermal Products Division, which includes
the RTP, LPCVD and Epi products. A second is the Plasma Products Division, which
includes the Strip, PECVD, and Copper product lines. The third product division
is the Wet Processing Division, which includes the Full Flow system of CFM and
the wet benches and Marangoni dryers from the Steag Wet Products group. Each
Product Division will be headed up by a President reporting directly to me.
Peter Augustin, current Chairman of STEAG RTP systems, will become President of
the Thermal Products Division. David Dutton, our current COO will become
President of the Plasma Products Division, and Roger Carolin, President and CEO
of CFM, will become President of the Wet Processing Division.

We plan to take advantage of our critical mass and the product commonalties by
having all the Products Divisions sell and support their customers through a
common Pipeline organization. This group will include a corporate engineering
and manufacturing group to establish common standards, and a Global Sales and
Service function. The global sales and service group is organized into Regional
Business Units, supporting our customers in Europe, Japan, Korea, Singapore,
Taiwan, and the United States. Ludger Viefhues, currently CFO of Steag RTP, will
be President & COO of Mattson Corporate, the Pipeline organization. To give you
a perspective on the proposed new organization, we will look at all four of
these Business Units in more detail.
<PAGE>   8

THERMAL PRODUCTS

First, thermal products. By combining the Steag's lamp-based RTP systems with
Mattson's susceptor-based RTP technology, we create a complete product
portfolio. Steag is a highly respected company in the area of RTP with the
combined technologies of AST and AG that they acquired over the years. They hold
numerous patents and have tremendous expertise in RTP. It turns out that while
lamp based systems are currently the technology of choice for many Thermal
Processing needs, the susceptor based technology may, in fact, be better for
several thermal processing steps including: low temperature applications,
process steps which have long process times, and any process that includes
deposition of has outgassing such as in LPCVD and reflow respectively. As the
only company that can offer both technologies, we feel the combined companies
can offer customers solutions to all their thermal processing requirement. We
will need this competitive edge to compete with Applied Material, the leader in
this sector. This is where the Aspen 3 platform can also help. It's possible
that Steag's RTP business has suffered because Applied has a strong platform for
their RTP business. We believe that Mattson's strength in platform technology
can be used to create even more competitive RTP solutions in the near future.

The Thermal Products Group will also include the Epi Product line from Mattson
and the LPCVD technology and products from Steag. The concept here is to take
advantage of the technology and market synergies. The technology synergy comes
from the common engineering design of all 3 product lines. All use quartz,
graphite, and sophisticated temperature measurement and control systems.
Exchanging technology across these products may improve the performance of each
product line.

On the market side the synergy is with the common customer and competitors. Our
goal is to focus on the furnace market. The furnace market is much larger than
the RTP market (over $1B as opposed to ~ $300M), and has different products,
technologies, and competitors. The main processes in the furnace are oxidation,
anneal, and LPCVD. The new Mattson will be organized through the Thermal
Products group to provide all those processes and thereby offer our customers an
alternative to the furnace. This potential is really the exciting opportunity
for the Thermal Products Group!!

WET PRODUCTS

Now, let's take a look at the Wet Products group. This group will include the
Wet Product Group of Steag and all of CFM's operations. These groups have been
involved in patent litigation issues for the

<PAGE>   9

last several years. This has not only distracted management, but also
significantly increased expenses, and resulted in loss of customer business and
loss of customer goodwill. As a part of this agreement, the patent litigation
will cease, and CFM will be granting a license to Steag to sell Wet processing
systems. We feel this will have a positive effect on both operations. The
combined revenues of STEAG and CFM, prior to their respective patent issues
(note: from 1995 though 1997) would have created a clear No 3 wet processing
company. We intend to recapture that position and capitalize further on the
strength of the combined operations.

Steag is viewed as having both very good engineering and a very broad product
line in Wet processing. At the same time, CFM is viewed as having very good
technology and a very unique system architecture that saves customers
significant floorspace and therefore cost. It's felt that the combination of
these resources will allow the new company to aggressively pursue increased
market share. The market leaders in Wet Processing, DNS and SES, are both
Japanese firms. This is where synergy with Mattson can come in. Mattson is the
#1 market share leader in Japan in Strip systems. We intend to use our
organization and experience in Japan to compete aggressively in the Wet Process
business. Even though we will only have #4 or #5 market share at first, we feel
the combination of capabilities from the 3 companies in this merger position the
new Mattson to be a leader in Wet Processing.

PLASMA PRODUCTS

Now, Plasma Products. These acquisitions do not directly effect Mattson previous
core business of Strip and CVD. These product lines will be combined in the new
Plasma Products group. Once the merger is complete we will also add Steag's
CuTek Division to this group. There is synergy in that these are all low
temperature processing steps, and our Strip and CVD groups are already very
involved in Copper though our Low-k deposition effort and our advanced strip
technology for low-k and copper.

Although not a direct effect, there is an interesting indirect effect of this
merger on our Strip group. We feel the new technology in Wet Processing will
also improve the positioning for our Strip product line. We have continued to
gain market share in the Strip market since 1994. Now that we are the clear
market leader, it is our goal to not only provide the best Strip equipment but
we need to provide the best process solutions as well. Resist strip is a type of
wafer clean. In almost all fabs in the world wafer clean is done with
combination of wet and dry cleaning (or strip) technologies. There are clear
synergies between Dry Strip and wet processing. We plan to offer our customers
optimized wafers cleaning solutions that may
<PAGE>   10

included wet and dry combinations - optimized equipment and recipes. There is no
other company that has integrated these technologies and can offer a total wet
and dry clean solution. It will be a clear benefit to our customers and
strategic advantage for Mattson Technology to develop this capability.

THE PIPELINE

Now let's discuss the Corporate organization and the specifically the pipeline.
First, this is a good opportunity to discuss the management of the combined
companies. . I will continue to hold the post of CEO of Mattson Technology.
Brian McDonald will retain his position as CFO. Dr. Jochen Melchior, chairman of
Steag Electronic Systems, will become chairman of the Board of Mattson
Technology, and Dr. Betz, CEO of Steag Electronic Systems, will also join
Mattson's Board. A representative of CFM will also join the board.

We intend to leverage the management talent pool of all three companies. As
mentioned previously, the presidents of the Product groups come from all three
Companies and the President of Mattson Corporate will be Ludger Viefhous of
Steag. The idea here was not to try to balance the staff but to in fact select
the best executives for each job. It so happens that all these companies are
currently successful and the executives very capable. We are pleased to be able
to have such a large group of management talent.

Now, for the pipeline organization. The advantages of critical mass are
significant to this organization. Our regional sales and service offices will
all have increased staffing levels that should give our customers confidence we
can support them anytime, anywhere in the world. Also, by selling all products
through a common sales force, we will be able to address a large part of our
customer's requirements. This is very important because our customer are trying
to reduce their supplier base and are looking for suppliers with more capability
to meet their needs. The new combined company hopes to address enough new
business with customers that we could bid for as much as $50M or more from each
new fab our customers build.

Through this pipeline organization with a corporate engineering function, we
will also promote a common platform, the Aspen 3, for use by all the product
division. This platform has been a key part of Mattson's continued market share
gains, and we expect some benefits from applying it to other product lines as
well.
<PAGE>   11

In addition to engineering synergies, there are also long term advantages in
terms of economies of scale in manufacturing. But, as all product groups are
growing so fast, we don't expect to integrate any manufacturing operation for
quite a while. There will still be a corporate manufacturing group to promote
"best practices" in manufacturing with a heavy focus on Quality, on time
delivery and cycle time reduction.

In summary, it is the responsibility of the pipeline organization to take
advantage of economies of scale, promote best practices, and provide a world
class delivery system for all the product groups to take advantage of. We are
excited about the opportunity to develop this world class organization.

SUMMARY

Wrapping this up, this is a clearly a major strategic move for Mattson. We
realize the integration process will be difficult, but we feel equally strong
that the benefits of critical mass, leadership in multiple product lines and
becoming a significant part of our customer's business far outweighs the risks.
When we close this deal, we feel we will have secured the necessary resources to
become a top 10-semiconductor capital equipment company. With our combined
revenues we would already be in the top 15 in year 2000. We will hold top market
positions in 3 major segments, and we will have additional upside potential with
our developing product lines in PECVD, Epi, LPCVD, and electroplated copper.

This is obviously a major turning point for us. Today we've announced there will
be a "new" Mattson Technology. One that will have the critical mass, technology,
product lines and management team to capitalize on the opportunities in this
current upturn We hope to better serve our customers, our employees and our
investors as a result of these opportunities.

With that I'd like to open up the call for questions.

Q&A PERIOD

Once again, I want to thank everyone for calling in. I hope we've been as
informative as possible in this short time. The management team and myself will
be making a big effort to get around the world to talk to our employees,
customers, and investors. I apologize in advance if we can't get to everyone

<PAGE>   12

immediately. Will realize that communication is our most important objective at
this time. If you have difficulty getting your question answered please don't
hesitate to contact me directly at [email protected]. Thanks again for
listening in.



© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission