Filed by Electro Scientific Industries, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Zygo Corporation
Commission File No. 000-12944
This filing relates to the proposed acquisition by Electro Scientific Industries, Inc. (“ESI”) of Zygo Corporation (“Zygo”) pursuant to the terms of an Agreement and Plan of Merger and Reorganization, dated October 15, 2008, by and among ESI, Zirkon Merger Sub, LLC, and Zygo (the “Merger Agreement”). The Merger Agreement was filed by ESI with the Securities and Exchange Commission under cover of Form 8-K on October 16, 2008 and is incorporated by reference into this filing.
Additional Information About the Acquisition and Where to Find It
ESI and Zygo intend to file with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4, which will include a joint proxy statement/prospectus with respect to the acquisition and other relevant materials (the “proxy statement/prospectus”). BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, STOCKHOLDERS AND INVESTORS OF ESI AND ZYGO ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT ESI, ZYGO AND THE ACQUISITION. Investors and security holders may obtain copies of the proxy statement prospectus, including the annexes attached to, and the reports incorporated by reference in, the proxy statement/prospectus, and any other related reports and documents filed or to be filed by ESI or Zygo with the SEC relating to the acquisition, free of charge, at the SEC’s web site at www.sec.gov. Investors and security holders also may obtain these documents free of charge from ESI at the Investor Relations link on ESI’s web site at www.esi.com or by contacting ESI’s Investor Relations at (503) 641-4141. Documents will also be available at the Investor’s link on Zygo’s web site at www.zygo.com, or by contacting Zygo’s Investor Relations at (860) 347-8506.
ESI and Zygo and their respective directors and executive officers may be deemed participants in the solicitation of proxies from security holders in connection with this transaction. Information about the directors and executive officers of ESI and Zygo and information about other persons who may be deemed participants in this transaction will be included in the proxy statement/prospectus. You can find information about ESI’s executive officers and directors in ESI’s proxy statement (DEF14A) filed with the SEC on June 27, 2008. You can find information about Zygo’s officers and directors in Zygo’s proxy statement (DEF14A) filed with the SEC on October 5, 2007 and Zygo’s annual report (Form 10-K) filed with the SEC on September 15, 2008. You can obtain free copies of these documents from the SEC or from ESI and Zygo using the contact information above. In addition, directors and executive officers of Zygo may have direct or indirect interests in the acquisition due to securities holdings, vesting of options, or rights to severance payments if their employment is terminated following the acquisition. Additional information regarding ESI, Zygo, and the interests of their respective executive officers and directors in the merger will be contained in the proxy statement/prospectus.
The following materials are filed:
| 1. | Investor presentation slides |
ESI-Zygo
Creating a Premier Microengineering and Metrology Company
Safe Harbor
This presentation may contain forward-looking statements which are subject to a number of risks and uncertainties. Risks and uncertainties that may affect the forward-looking statements include:
Risks surrounding the proposed combination, including the deal closing; regulatory or shareholder approval being granted; integration resulting in projected synergies; and retention of key employees post-closing.
The relative strength and volatility of the electronics industry which is dependent on many factors including component prices, global economic and political stability, and overall demand for electronic devices used in wireless telecommunications equipment, computers, and other consumer and automotive electronics
The ability of the company to respond promptly to customer requirements
The ability of the company to develop, manufacture and successfully deliver new products and enhancements
The ability of the company to achieve anticipated cost reductions and savings
The company’s need to continue investing in research and development
The company’s ability to create and sustain intellectual property protection around its products.
Such risks and uncertainties are discussed in more detail in the company’s annual report on From 10-K and other interim reports on Form 10-Q.
www.esi.com
Combination Creates a Premier, Global Supplier of Micro-engineering and Metrology Systems
Pioneer and premier provider of photonic systems for high volume microengineering applications
Laser based micro-machining solutions
Systems engineering for high volume production systems
Pioneer and leading provider of high precision metrology solutions and optical systems
R&D Metrology tools & process control
High precision optics and optical systems
Complementary core competencies that accelerate strategies for growth
Increased product portfolio and expanded addressable market Greater global scale and market presence
www.esi.com
Combination Creates a Premier, Global Supplier of Micro-engineering and Metrology Systems
CY2007Revenues $291 million $167 million
Addressable Market $650 million $1,250 million
Product Groups Semiconductor Metrology
Micromachining Optical systems & components
Passive Components
Photonics microengineering Photonics metrology
Core Competencies Optics & illumination Optics precision components & systems
Systems engineering Process Control
High volume manufacturing Instrument tools
End Markets Semiconductor manufacturing Industrial
High precision manufacturing Medical
Microelectronics Defense
Semiconductor
Flat panel display
www.esi.com
Complementary Core Competencies Enhance Strategy for Growth
Zygo brings to ESI
Access to differentiated & sustainable technology for precision inspection, measurement, & metrology
World class optics capability
Expanded presence in medical, industrial, security and other targeted markets
ESI brings to Zygo
Proven experience, size, and reputation for high volume production systems
Access to systems engineering, expertise, sales & support infrastructure
Expanded presence in Asia, especially Korea and Japan
www.esi.com
Enabling Future Growth and Profitability
Merger supports Zygo’s systems growth strategy
Zygo accesses ESI’s leadership in system integration, expertise, sales and support infrastructure
Creates future micro-machining application opportunities
ESI accesses Zygo’s world class metrology and optics
Expands ESI’s addressable markets
Opens up semiconductor, microelectronics, medical and industrial markets already targeted by ESI
Provides opportunity for Cost Synergies
Public company costs, infrastructure, supply chain, administrative support
www.esi.com
Merger Creates a Stronger Industry Player
CY2007 Revenue
600 400 200 0
598 593 522 503 478 458 442 402 361 291 167 160 146
Coherent FEI Cymer Rofin -Sinar GSI
Newport Veeco Orbotech
Rudolph nanometrics
GSI figure includes Excel Technology
www.esi.com
Solid Historical Financial Performance
Pro Forma Historical Revenue
Pro Forma Historical Gross Profit
500 400 300 200 100
2005 2006 2007
Source: company filings and ESI estimates
Excludes stock compensation & purchase accounting
344 410 458
www.esi.com
200 150 100 50 2005 2006 2007
143 175 200 41.5% 42.6% 43.7% 44.0% 42.0% 40.0%
Pro Forma Historical EBITDA
80 60 40 20 44 56 66 2005 2006 2007
Capturing Benefits of Scale
Diversified revenue stream minimizes business group cyclicality impact
Increased revenues and cost savings lower the relative breakeven point
Deal structure maintains strong balance sheet
* FY 2008 revenues include ESI FY08 revenues, ended March 2008, annualized to a 12-month year. Zygo’s FY08 ended June 2008.
www.esi.com
2007 Revenues by Product Group, pro forma combined
Passive Components
Interconnect & Micromachining Semiconductor Products Total Revenue: $458M
Optics Metrology
2007 Revenues by Geography, pro forma combined
Americas Asia
Total Revenue: $458M
FY 2008 Revenues by End Market, pro forma combined*
Europe Electronics Semiconductor
Total Revenue: $456M
Industrial/Other
Transaction Overview
Transaction Type Exchange Ratio Ownership Split Combined Equity Value Expected Close Approvals Required
Stock for Stock Merger
1.0233 ESI share / 1 Zygo share 60% ESI 40% Zygo $455M
Q1 Calendar 2009
HSR, SEC, Shareholders
www.esi.com
Delivering Shareholder Value
Share price premium of approximately 36% for Zygo shareholders
Expected to be accretive in FY 2010 on a non-GAAP basis
Annual synergy benefit of $5-7 million after integration
Expected cash balance of over $200 million enables significant share repurchase, strategic investments, and financial stability
Accelerates complementary growth strategies of both companies
Minimal organizational and product overlap reduces integration risk
Complementary photonics-based core competencies, similar cultures and friendly merger
Increased scale and diversified revenue stream positions company for success in challenging international markets
www.esi.com
Summary
Combination of ESI and Zygo creates a differentiated and sizeable photonics systems company
Provides customers with solutions from micro-engineering to metrology
Complementary technology and markets enhance value
Strong cultural fit between two industry leaders
Scale and breadth of combined company creates broader market presence and mitigates cyclicality of individual businesses
Combination provides stronger financial profile
www.esi.com
ESI
Company Overview
Focused on Technology Leadership
ESI is a pioneer & premier provider of photonic-based systems for high-volume micro-engineering applications.
The company leverages its technology leadership to enable better performance & yields for its global customers.
www.esi.com
ESI at a Glance
Headquarters: Portland, Oregon CY 2007 Revenue: ~$291M CY2007 EBITDA: $47M Employees: ~700 IP Position: >600 patents
Markets: semiconductor, micro-engineering, passive components
Addressable Market: ~$650M
Global Presence: Sales and support in U.S., Europe, Asia
www.esi.com
Global Customer Base
www.esi.com
ESI Core Competencies
ESI uniquely possesses the core competencies to design, manufacture & market integrated solutions that direct & characterize photons for high-volume-manufacturing applications.
Direct Photons
Laser Beam Positioning
Laser/Material Interaction
Characterize Photons
Optics & Illumination
Vision Algorithms
Integrate Solutions
Automation & Micro Handling
Systems Engineering
www.esi.com
Leveraging Competencies Across Market Segments
Common competencies enable ability to address multiple applications & markets
Differentiated capability enables leadership
Laser Laser Optics & Vision Automation Systems
Beam Positioning Material Interaction Illumination Algorithms & Material Handling Engineering
Memory Repair
TFOS
LED Wafer Scribing
LCD Repair
Wafer Singulation
High-Density Interconnect
Micro-Machining
Electrical Test
Optical Test
www.esi.com
ESI Business Profile
Semiconductor Products Group
Memory repair
Thin film on silicon trimming (TFOS)
LED wafer scribing
LCD repair
Wafer singulation
Interconnect & Micromachining Group
High-density interconnect
• Flex Circuits
• IC Packaging
Micro-Machining
Passive Components Group
Electrical test
Optical test
Strong position across addressed markets.
www.esi.com
Miniaturization & Complexity Drive Growth
Semiconductor Products Group (SPG)
Rising memory bit growth
Increasing wafer density
Interconnect & Micromachining Group (IMG)
Smaller, more complex designs
Transition from traditional tools to micro-machining laser systems
Passive Components Group (PCG)
Increasing functionality & miniaturization of electronic devices
Jump in device volume & required capacitance
Silicon Wafer
Flex Circuit
MLCCs
www.esi.com
Photonics-Centered Growth Strategy
Leverage core competencies to be the market leader across multiple new & established markets & applications
Grow share in established markets
Enhance leadership positions with advanced technologies that deliver higher performance & yields
Expand addressable market
Enter into adjacent applications within existing markets
Extend existing applications & technology into adjacent markets
www.esi.com
Growth Strategy Execution
FY’06 Revenue in Millions
FY’07 Revenue in Millions
FY’08 Revenue in Millions
$195M* $237M* $302M*
*Revenue calculated based on trailing four quarters at March 2008 fiscal year end, excluding June 2007
www.esi.com
Micro Machining $30M
Passives $42M
Semi $123M
Micro machining $44M
Passives $64M
Semi $128M
Micro machining $67M
Passives $84M
Semi $152M
ZYGO
Company Overview
Zygo Corporation
High Precision Technology Solutions
ZYGO is a leading provider of high precision metrology solutions and optical systems
A worldwide center of excellence in process control and R&D metrology tools
A global leader in high precision optics and optical systems
ZYGO products serve a wide variety of end markets including semiconductor, flat panel display, defense & aerospace, medical, industrial and other
38 years of leadership in metrology and optical systems
www.esi.com
24
Zygo at a Glance
Founded in 1970
Headquartered in Middlefield, CT CY2007 Revenue - $167M CY2007 EBITDA—$19M
Employees - ~600
Addressable Market: $1,250M
Markets: Semiconductor, Flat Panel, Medical, Aero/Defense, Industrial
www.esi.com
25
Building Powerful, Versatile Tools
Dimensions
Form
Roughness
Optical
Interference
Utilizing core interferometry technology within versatile tools capable of making a variety of measurements
www.esi.com
26
Strong, Differentiated IP and Unrivaled Pool of Talent
US Patents Issued (Cumulative)
2000 2001 2002 2003 2004 2005 2006 2007
1: As published in BusinessWeek, January 8, 2007
| 8 |
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27 33 43 79 109 136 165 |
One of the Top 15 Inventive Stocks for 20071
Inventive Stocks for 2007
P-E PIPELINE
COMPANY RATIO QUALITY INDUSTRY
Grant Prideco GRP 13.9 3.52 Oil & gas equipment
Polaris Industries PII 16.1 3.06 Recreational vehicles
MicroStrategy MSTR 24.1 2.97 Business software
Donaldson DCI 21.9 2.72 Pollution & treatment controls
Amkor Technology 11.0 2.44 Semiconductor
Albany International AIN 15.7 2.4 Textile Industrial
Pactiv PTV 20.0 2.32 Packaging & containers
Magna International MGA 15.9 2.07 Auto parts
Intermec IN 21.4 2.01 Computer peripherals
3M MMM 17.2 1.95 Conglomerate
Palm PALM 4.4 1.95 Computer systems
Wyeth WYE 17.2 1.94 Pharmaceuticals
ZYGO ZIGO 19.0 1.61 Scientific instruments
Newport NEWP 27.4 1.6 Scientific instruments
Cummins CMI 8.7 1.59 Diversified machinery
Pipeline Quality measures the impact, originality, and generality of a company s patent portfolio. The average Pipeline Quality value for the whole patent system is 1. A number above that reflects above average patent performance.
Data provided by 1790 Analytics.
27
www.esi.com
Unparalleled Reputation and Committed Customers
Semiconductor & Flat Panel Defense & Aerospace Medical, Industrial & Other
Customers view ZYGO as the preeminent leader in the optics and metrology industries
www.esi.com
28
Broad Range of End Markets
Semiconductor
Flat Panel Display
Medical
Where nano-scale meets industrial and consumer needs
Industrial & Other
Defense & Aerospace
www.esi.com
29
Positioned for Growth Driven by Nano-Scale Adoption
Increasing global investment in nano-scale products across numerous areas
Government, industrial, commercial, laboratory and scientific research
ZYGO is poised to benefit from accelerating trend toward nano-scale products
Require ultra-high manufacturing precision
Industrial and consumer needs are evolving into ZYGO’s sweet spot
ZYGO’s value proposition directly enhanced
Semiconductor fabrication metrology and inspection
Flat panel display
Optical subassemblies
ZYGO is focused on creating new opportunities via active investments
In-line opportunities
Optical subassemblies
Global Nanotechnology Market Forecast
$30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0
$, in millions
2005 2006 2007 2008 2009 2010 2011
Source: BCC Research
2006-2011 CAGR: 1 9.4 %
ZYGO: Growing in a Shrinking World
www.esi.com
30
ZYGO’s Business Profile
Metrology Solutions Division
Optical Systems Division
$167mm CY07 Revenue
Gross Profit Target: 45% 55% High sales & RD&E costs Operating Profit Target > 15%
~70%
~30%
Gross Profit Target : 25% 45% Low sales and RD&E costs Operating Profit Target: 15%
Instruments PPS In-line Tools Components Electro-Optics
Core Business Growth Initiatives Core Business
www.esi.com
31
ZYGO’s Growth Strategy
Leveraging Core Technology to Provide High-Value Systems
Bring instrument technology to production floor for in-line usage
Metrology Instruments ASP = $100-150K
Metrology Production Floor Tools ASP = $1-1.5mm
Leverage optical components expertise into optical assemblies
ASP = X ASP = 10X
www.esi.com
32
Leveraging Core Technology Over Multiple Markets
Strong foundation of core metrology and optics technology
Core technology applied to target diverse markets and applications
Leveraging core technology to address high volume in-line opportunities (e.g. semiconductor and flat panel display)
www.esi.com
33
Disclosures
ESI and Zygo intend to file with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4, which will include a joint proxy statement/prospectus with respect to the merger and other relevant materials (the “proxy statement/prospectus”). BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, STOCKHOLDERS AND INVESTORS OF ESI AND ZYGO ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT ESI, ZYGO AND THE ACQUISITION. Investors and security holders may obtain copies of the proxy statement/prospectus, including the annexes attached to, and the reports incorporated by reference in, the proxy statement/prospectus, and any other related reports and documents filed or to be filed by ESI or Zygo with the SEC relating to the merger, free of charge, at the SEC’s web site at www.sec.gov. Investors and security holders also may obtain these documents free of charge from ESI at the Investor Relations link on ESI’s web site at www.esi.com or by contacting ESI’s Investor Relations at (503) 641-4141. Documents will also be available at the Investor’s link on Zygo’s web site at www.zygo.com, or by contacting Zygo’s Investor Relations at (860) 347-8506.
ESI and Zygo and their respective directors and executive officers may be deemed participants in the solicitation of proxies from security holders in connection with this transaction. Information about the directors and executive officers of ESI and Zygo and information about other persons who may be deemed participants in the merger transaction will be included in the proxy statement/prospectus. Information about ESI’s executive officers and directors is included in ESI’s proxy statement (DEF14A) filed with the SEC on June 27, 2008. Information about Zygo’s officers and directors is included in Zygo’s proxy statement (DEF14A) filed with the SEC on October 5, 2007 and Zygo’s annual report (Form 10-K) filed with the SEC on September 15, 2008. Free copies of these documents can be obtained from the SEC or from ESI and Zygo using the contact information above. In addition, directors and executive officers of Zygo may have direct or indirect interests in the merger due to securities holdings, vesting of options, or rights to severance payments if their employment is terminated following the merger. Additional information regarding ESI, Zygo, and the interests of their respective executive officers and directors in the merger will be contained in the proxy statement/prospectus.
www.esi.com