The agreement will allow ASML to proceed with its planned acquisition of San Jose-based SVG, which will make ASML the world's largest supplier of semiconductor lithography tools. ASML official today said they expect to complete the $1.6 billion stock acquisition of SVG within the next few weeks--probably May 21.

"As far as the government is concerned we have agreed to use best efforts to sell Tinsley," said ASML chief executive officer Doug Dunn, during a conference call today after announcing the agreement. "They are happy and I have seen all of the signatures of the parties, and that's finished.

"The next two weeks it is merely an issue of the two companies--SVG and ASML--closing all of the legal things that are required when transferring assets. It has nothing to do with Tinsley," added Dunn, who signed the agreement with the U.S. at 1 a.m. today in Veldhoven (7 p.m. Wednesday, Washington time).

The agreement with the Committee of Foreign Investment in the United States (CFIUS) comes after a 45-day review of ASML's proposed purchase of SVG, which touched off highly publicized lobbying efforts by groups expressing concerns about national security issues and protection of defense-related technologies. Some of the opposition also centered on the potential loss of leading-edge semiconductor lithography in the U.S.

The CFIUS panel could not initially reach a consensus agreement among U.S. agencies on how to handle ASML's planned purchase SVG and its lithography assets. Last week, the issue was set be handed to President Bush with no official recommendation by the committee.

However, the extra 15-day review period for Bush was used by CFIUS and ASML to hammer out an agreement, and the issue was never submitted to the U.S. President, according to Dunn during today's conference call.

"The process of looking at Tinsley and deciding whether we sell it and how we sell it begins in two weeks time, when the SVG acquisition deal is closed," Dunn said. He added that from here the process of completing the merger is "procedural and unconditional. It's done and finished and over and out," the CEO added in response a question of whether or not Bush still needed to sign off on the transaction.

The signatures of the U.S. undersecretaries of Defense and Treasury are "all the authority that is needed to pass this through," Dunn said. "In other words, the CFIUS committee has unanimously agreed the negotiated proposals and is empowered to approve the deal. So I believe George Bush's signature--much as I would like to see it on a piece of paper as a souvenir--is not necessary in this case."

Under the agreement, ASML will explore "several strategic alternatives" with regards to the Tinsley unit, including a "good-faith effort" to sell the subsidiary during the next six months.

During today's conference call, Dunn said ASML will require the potential buyer of Tinsley to continue supplying lens-polishing technologies for SVG lithography systems. If that agreement is not reached, Dunn said, Tinsley will not be sold. Dunn said ASML has been contacted by several U.S. parties interested in purchasing Tinsley, but he would not identify them.

ASML has also agreed to implement security measures at Tinsley to prevent sensitive technology from slipping into unwanted hands, Dunn said. ASML agreed to maintain lithography R&D and operations in the U.S. for a certain number of years--between five and 10 years, said Dunn, who won't release specific details. (See today's sidebar on ASML's concessions to win U.S. approval of the SVG purchase.)

"We are very pleased that the U.S. government has cleared the way for our two companies to merge," Dunn said in an issued statement while announcing the agreement. The CEO added, "We have reached a solid agreement that meets the needs and concerns of the U.S. government and allows ASML and SVG to proceed forward and provide leading-edge lithography equipment to the semiconductor industry."

Tinsley, which was acquired by SVG in 1997, has supplied lens-polishing services for U.S. military satellites in the 1990s, causing some Defense Department officials to oppose ASML's takeover of Silicon Valley Group. During the 45-day review period by the CFIUS panel, ASML officials repeatedly said they were open to selling Tinsley if that would enable the Dutch lithography company to complete its purchase of SVG (see April 26 story).

Tinsley Laboratories posted revenues of $17 million in SVG's fiscal year 2000, representing 2% of Silicon Valley Group's total sales. About 120 people work at Tinsley in California.

Dunn thanked the support of U.S. chip makers in ASML's efforts to gain U.S. clearance of the SVG acquisition. He also blasted the lobby efforts that were aimed at blocking the deal, saying the delays jeopardized the advancement of photolithography technology for U.S. chip makers.

The purchase was fought by a number of group, including the U.S. Business and Industry Council, which began circulating a video tape showing lithography experts against the merger (see April 13 story). However, ASML also got the endorsement of major U.S. chip companies, including Intel Corp., which is a major user of SVG Lithography tools.

"Throughout the CFIUS process, we received many strong expressions of support for which we are most appreciative, particularly from ASML's and SVG's respective customers and the U.S. Semiconductor Industry Association who understand and fully support this commercial transaction," Dunn said. "We now look to the future in conjunction with our new colleagues at SVG as we work towards developing and introducing next-generation lithography tools.

"The new company will have a combined workforce of about 7,500 people of whom around 50% will be employed in the U.S.," added Dunn.

--J. Robert Lineback reporting from the U.S.