Queens, New York native John Paulson (Trades, Portfolio) sold out his remaining shares of Lam Research (LRCX)Â during the second quarter for an average price of $80.37 per share. Since Paulson sold out his remaining shares, Lam Research has risen by an estimated 16% in price.
Lam Research has a market cap of $14.95 billion, a price-earnings (P/E) ratio of 17.88, an enterprise value of $12.46 billion and a price-book (P/B) ratio of 2.52.
Lam Research is an American corporation originally founded in 1980. The company is engaged in designing, manufacturing, marketing and servicing semiconductor processing equipment used in the fabrication of integrated circuits.
As I stated in a previous article, Lam Research has multiple good signs, including a book value that has grown at an average rate of 16% annually over the previous 10 years. The company has over 35 years of operating experience, and it has proprietary technology, as nearly every leading-edge integrated circuit made today has been processed with Lam Research equipment.
The company reported in October 2015 that it has plans to merge with KLA-Tencor (KLAC, Financial). It is possible that John Paulson (Trades, Portfolio) decided to sell out his holding in the company due to the variance involved if the company is unable to successfully complete the transaction by Dec. 30 of this year.
According to the company’s most recent 10-K filing:
"Our Leverage and Debt Service Obligations and Potential Note Conversion or Related Hedging Activities May Adversely Affect Our Financial Condition, Results of Operations and Earnings Per Share
We have $4.55 billion in aggregate principal amount of senior unsecured notes and convertible note instruments outstanding. If the anticipated acquisition of KLA-Tencor is not completed on or prior to December 30, 2016, or the related merger agreement is terminated on or at any time prior to that date, the indenture governing the senior unsecured notes issued in June 2016 requires us to redeem $1.6 billion of those senior unsecured notes at a redemption price equal to 101% of the principal amount, plus accrued interest. In addition, in connection with the acquisition of KLA-Tencor, we have also entered into a term loan agreement with certain term lenders pursuant to which the term lenders have agreed to provide a senior unsecured term loan facility in an aggregate amount of up to $1.53 billion, subject to certain terms and conditions. If the anticipated acquisition of KLA-Tencor is not completed on or prior to October 20, 2016, we will need to obtain consent from all of the lenders under the term loan agreement to extend their commitments past this date. Additionally, we have $750 million available to us in revolving credit arrangements, with an option for us to request an increase in the facility of up to an additional $250 million, for a potential total commitment of $1 billion. We may, in the future, decide to borrow amounts under the revolving credit agreement, or to enter into additional debt arrangements."
According to an article on Bloomberg written on Aug. 10, Lam Research said its $10.6 billion acquisition of KLA-Tencor is facing regulatory hurdles and probably will not get approval before the planned closing date in October. It is very likely that Paulson wanted to exit his stake in Lam Research to reduce his chances of losing money in case the merger is not successfully completed. Lam Research’s share price would likely decline in these circumstances.
Cheers to your investment success!
Disclosure:Â Author does not own any shares of this company.
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