Orbotech Ltd. has bought Photon Dynamics Inc. of the US for $290 million in an effort to boost its flat-panel display business. It marks the largest acquisition by the Yavne-based hi-tech company. Orbotech, which is traded on the Nasdaq, makes automated inspection systems for printed circuit boards (PCB) and flat-panel displays (FPD). Under the terms of the deal, Orbotech will pay $15.60 per share in cash for all of the issued and outstanding shares of Photon Dynamics' common stock, a premium of about 35 percent over the stock's Wednesday closing price of $11.56. The acquisition is being financed through a combination of internally generated funds and external-source financing, the company said. Orbotech, which has a market capitalization of $483m., said the acquisition was its largest until now and represented a major part of its strategy for growth and diversification in the flat-panel display business. "The synergies resulting from the integration of our two companies' highly complementary skill sets, technologies and infrastructures will open the door to significant enhancements in FPD yield management and process control, and will create potential for other production capabilities in the future," Orbotech CEO Rani Cohen said. "It will allow us to capitalize more comprehensively on current and emerging opportunities in the flat-panel display industry, while building upon and further expanding our current range of solutions, all of which will bring added value to our customers and will benefit our employees and shareholders." Photon Dynamics is a provider of test and repair systems for the liquid crystal (LCD) flat-panel display industry, with a total market capitalization of $268m. "We see this new venture as a very exciting opportunity to provide FPD customers with a one-stop shop that offers a complete line of yield management solutions," Photon Dynamics president and CEO Jeffrey A. Hawthorne said. "By teaming up with Orbotech, which is committed to investing in innovative technologies, we will be able to grow the combined business and improve its competitive positioning as we face a maturing industry." The boards of directors of both companies have already approved the acquisition. The transaction is subject to customary conditions to closing, including approval by Photon Dynamics' stockholders and requisite regulatory approvals, and is expected to close during the second half of 2008. Orbotech's financial advisor on the transaction is Lehman Brothers Inc. Photon Dynamics' advisor on the deal is Credit Suisse Securities.