In September, Applied Materials (NASDAQ:AMAT) announced plans to merge with Tokyo Electron ("TEL") (TSE:2760). Both Applied Materials and TEL are well respected in the semiconductor equipment industry. We initially invested in Applied during a cyclical downturn in the industry, yet with the belief that growth prospects were bright over the longer term due to continuing technology transitions as semiconductor chips get smaller and more complex and the potential for Applied Materials, specifically, to gain further market share. The transaction is structured such that Applied Materials shareholders will own 68% of the new company with TEL shareholders getting the remainder. The benefits of the merger for Applied shareholders include expanded market opportunities (particularly in processes such as etch and selective materials removal) and more efficient research and development. The companies estimate potential synergies totaling $250 million at end of the first year and $500 million by the end of the third year, driven from enhanced efficiencies in the supply chain, manufacturing, IT and corporate overhead. While we are optimistic about consolidation in the industry longer term, Applied's stock price increased on news of the transaction to a level where the valuation was not as attractive as other opportunities and we exited the position, locking in our 25% internal rate of return on our investment.From Third Avenue Management's fourth quarter 2013 commentary.