NEW YORK (TheStreet) -- Shares of KLA-Tencor (KLAC) - Get Report were gaining 23.6% to $66.58 with heavy trading volume on Wednesday following the announcement that Lam Research (LRCX) will acquire the semiconductor equipment company.

Lam Research is a supplier of wafer fabrication equipment and services to the semiconductor industry

KLA-Tencor shareholders will receive $32 in cash and half a share of Lam Research common stock for each share of the company they own under the terms of the agreement. The deal values KLA-Tencor at about $67.02 a share, or $10.6 billion in equity value based on Lam Research's Tuesday closing price.

The companies said the combination will help them "create unmatched capability in process and process control," and to ultimately help the semiconductor industry extend Moore's Law and performance scaling.

"I strongly believe that this transaction represents a great outcome for all of KLA-Tencor's key stakeholders," KLA-Tencor President and CEO Rick Wallace said in a statement. "The combined company will be uniquely positioned to work collaboratively with our customers to help them meet the challenges of FinFET, multi-patterning and 3D NAND development."

About 6.4 million shares of KLA-Tencor were traded by 10:07 a.m. Wednesday, well above the company's average trading volume of about 1.7 million shares a day.

TheStreet Ratings team rates KLA-TENCOR CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate KLA-TENCOR CORP (KLAC) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 14.7%. Since the same quarter one year prior, revenues slightly increased by 3.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, KLA-TENCOR CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • KLA-TENCOR CORP has improved earnings per share by 15.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KLA-TENCOR CORP reported lower earnings of $2.25 versus $3.47 in the prior year. This year, the market expects an improvement in earnings ($3.28 versus $2.25).
  • KLAC has underperformed the S&P 500 Index, declining 21.96% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The debt-to-equity ratio is very high at 7.57 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.00, which shows the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: KLAC