(Recasts; adds details, analyst's comment, updates share movement)
By Purwa Naveen Raman
BANGALORE, Sept 15 (Reuters) - Axcelis Technologies Inc (ACLS.O) said Japan's Sumitomo Heavy Industries (6302.T) has shelved its plans to buy the semiconductor gear maker, sending Axcelis's shares plunging 71 percent to their lowest ever. On Sept. 4, Sumitomo informed that it would not make a definitive acquisition proposal for the company and was placing discussions regarding the deal "on hold," Axcelis said in a regulatory filing.
"Either Sumitomo did not like this at all when they did due diligence or they decided timing wasn't right given the unhealthy state of the semiconductor equipment market," Pacific Crest Securities analyst Weston Twigg said by phone.
Twigg said he did not expect any other company to show interest in Axcelis.
The companies were not immediately available for comments.
Axcelis in March rejected a sweetened $616 million unsolicited takeover bid from Sumitomo, saying it undervalued the company and failed to compensate it for the potential of new products.
The companies signed a confidentiality agreement in June, but negotiations got derailed in August after Axcelis set a deadline for Sumitomo to make a new proposal by the end of the month.
Sumitomo, which has been circling the semiconductor gear maker for about two years, did not submit a new proposal on concerns over the difficulty in restructuring Axcelis and its financial performance.
Axcelis, which makes ion implantation equipment used to manufacture semiconductors, has been losing market share to rival Varian Semiconductor Equipment VSEA.O and the company's new implant platform has not seen a wide-spread adoption, Twigg said.
The semiconductor equipment industry has been battered by lower spending in the memory market and sales are likely to fall 20 percent this year, according to a midyear forecast by industry group Semiconductor Equipment and Materials International.
Axcelis and Sumitomo, which makes heavy machinery, have a joint venture in Japan called SEN, which is at the center of the dispute between the two companies.
Axcelis said its board is currently evaluating several refinancing plans and had suggested that Sumitomo allow SEN to make a loan to Axcelis from its cash balance of $120 million.
"Axcelis' share of SEN's cash has been trapped in Japan because Sumitomo has declined to join Axcelis in approving dividends ..." it said.
Sumitomo also proposed to offer a small loan from SEN which was conditioned upon the company taking control of the joint venture, Axcelis said in the filing.
Shares of Axcelis, which was spun off from Eaton Corp (ETN.N) in 2000, slumped $2.90 to $1.34 in afternoon trade on Nasdaq. They had fallen to their lifetime low of $1.25 earlier.
"This takeover bid was supporting the stock price so far," said Twigg, who has a "sector perform" rating on the stock. (Editing by Amitha Rajan, Deepak Kannan)