PORTLAND, Ore. (AP) -- Electro Scientific Industries Inc. said Thursday it agreed to buy Zygo Corp. in an all-stock deal worth about $173.6 million based on Zygo's outstanding shares as of Sept. 2.
Electro, which makes test equipment for semiconductor manufacturers, is paying 1.0233 shares of its stock for each Zygo share. Based on Wednesday's closing price, this is valued at $10.30 per Zygo share, a premium of 36 percent to Zygo's closing price of $7.57.
Middlefield, Conn.-based Zygo makes optical components, inspection and measurement equipment and automation systems.
After the deal closes, Electro said it will issue about 18.1 million shares, which will give Zygo shareholders a 40 percent ownership of the combined company. Electro also said its board boosted its stock buyback authorization to $100 million, which is contingent on the completion of the merger.
Electro said the acquisition will create new growth opportunities and mitigate the cyclicality of the combined company's businesses because it will be more diverse.
Electro expects the acquisition to increase adjusted earnings in the first full fiscal year of combined operations.
The deal is expected to close in the first quarter of 2009.
Shares of Electro Scientific fell 63 cents, or 6.3 percent, to $9.44 in afternoon trading. Earlier, the stock hit 10-year low of $8.60.
Zygo's shares jumped $1.02, or 13 percent, to $8.59. The stock has traded between $4.66 and $13.79 in the past year.