June 24, 2015
Jimmy S. M. Lee
Scott D. Howarth
President and Chief Executive Officer
Integrated Silicon Solution, Inc.
1623 Buckeye Drive
Milpitas, California 95035
Messrs. Lee and Howarth,
On behalf of Cypress Semiconductor Corporation (“Cypress”), I hereby submit our best and final offer for Integrated Silicon Solution, Inc. (“ISSI”) and attach a revised draft Agreement and Plan of Merger between ISSI and Cypress (the “Revised Definitive Merger Agreement”). Cypress is increasing its offer to acquire ISSI to a price of $22.60 per share (the “Revised Offer”), while maintaining its previously outlined ticking fee of $0.10 per share per quarter beginning October 1, 2015. Our strategic and financial analysis indicates this is the maximum price justified for ISSI in order for the deal to create long-term value for our shareholders. Again, we are prepared to put the Revised Definitive Merger Agreement reflecting our Revised Offer, signed by me to demonstrate our sincerity and strong commitment to closing this transaction, into escrow through our lawyers today. We strongly believe that our Revised Offer clearly represents a superior, risk-adjusted proposal to the transaction contemplated by the current Agreement and Plan of Merger (the “Uphill Agreement”) with Uphill Investment Co. (“Uphill”).
Cypress’s Revised Offer demonstrates committed financing, eliminates regulatory risk by agreeing to possible ISSI SRAM divestitures, and includes a ticking fee to compensate for any unforeseen delay in closing. Additionally, we continue to believe that a transaction with Cypress would benefit not only ISSI shareholders, but also ISSI customers due to the increased breadth and strategic capabilities of the product offerings of the combined companies. Conversely, the Uphill transaction continues to be burdened with risks and uncertainties with respect to the:
- Continued existence of a contractual financing out clause for the lender supporting the Uphill transaction,
- Continued complexities of the government-mandated Taiwan divestitures, and
- A potential prolonged investigation by The Committee on Foreign Investment in the United States (“CFIUS”)—the inter-agency committee of theUnited States Government responsible for reviewing the national security implications of foreign investments in U.S. companies.
As we have noted previously, had we been included in your sale process, your shareholders would have reaped two significant benefits: a more time-efficient price-discovery process and the capture of a potential incremental $0.56 per share per quarter, which was instead misspent on an unnecessary breakup fee. To the extent the ISSI board decides to proceed with the Uphill transaction, and that higher risk transaction faces significant delays or fails to close, Cypress may be interested in acquiring ISSI in the future, but expects that our offer at that time may be substantially below this Revised Offer. Finally, we fully expect that Uphill, with its backing from the Chinese government, will increase its offer price subsequent to the release of this letter, thereby acknowledging and attempting to compensate for the higher level of risk in completing their transaction.
President and Chief Executive Officer (Original Source)
Shares of Cypress Semiconductor closed yesterday at $12.36 . CY has a 1-year high of $16.25 and a 1-year low of $8.04. The stock’s 50-day moving average is $13 and its 200-day moving average is $13.86.
On the ratings front, Cypress Semiconductor has been the subject of a number of recent research reports. In a report issued on June 11, Wedbush analyst Betsy Van Hees reiterated a Buy rating on CY, with a price target of $17, which represents a potential upside of 37.5% from where the stock is currently trading. Separately, on June 1, Needham’s Rajvindra Gill maintained a Buy rating on the stock and has a price target of $20.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Betsy Van Hees and Rajvindra Gill have a total average return of 17.6% and 24.3% respectively. Hees has a success rate of 57.8% and is ranked #261 out of 3640 analysts, while Gill has a success rate of 65.5% and is ranked #32.
Cypress Semiconductor Corp with its subsidiaries, designs, develops, manufactures and markets high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and system value.