Cypress Continues to Circle ISSI
Cypress Semiconductor Corp. continues to evolve its offer to acquire Integrated Silicon Solutions, Inc. (ISSI). Cypress recently announced that it sent a letter to the Board of Directors of ISSI improving on its earlier offer. In response to the letter from Cypress, ISSI today announced that it has entered into a further amendment to the previously announced merger agreement with Uphill Investment Co (Uphill). As a result of the amendment, the merger consideration was further increased to $22.00 per share in cash, from the $21.00 per share in cash pursuant to the Agreement of Merger dated as of March 12, 2015, as previously amended (the Uphill Agreement).
ISSI also announced that its special meeting of stockholders to consider approval of the Uphill acquisition and related matters will be adjourned to be held on June 25, 2015 at 2:00 p.m. local time, at the offices of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California 94304. ISSI stockholders of record as of the close of business on April 20, 2015 are entitled to notice of, and to vote at, the special meeting.
The ISSI Board of Directors continues to recommend that ISSI’s stockholders vote FOR the adoption of the Uphill Agreement. ISSI and Uphill amended the Uphill Agreement after Cypress announced yesterday that it had submitted a revised offer of $21.25 per share (as set forth in a revised draft definitive merger agreement), together with an incremental ticking fee of $0.10 per share for each additional three months required to obtain regulatory approval for a transaction with Cypress which would begin to accrue daily starting on October 1, 2015.
After considering that the revised offer from Cypress (including the expected value of the ticking fee) had a lower price than the $22.00 per share provided by the amended Uphill Agreement, the ISSI Board has determined that the revised proposal from Cypress does not constitute, and would not be reasonably expected to lead to a Superior Proposal
The earlier letter from Cypress to which ISSI was responding read as follows: "On behalf of Cypress Semiconductor Corporation (“Cypress”), I hereby attach the revised draft Agreement and Plan of Merger between Integrated Silicon Solution, Inc. (“ISSI”) and Cypress (the “Revised Definitive Merger Agreement”), which fully responds to the presentation you filed on June 12, 2015 titled “Uphill Investment Co. Merger Proposal, Special Meeting of Stockholders” (the “Presentation”).
"In the Presentation, you expressed several concerns regarding the Definitive Merger Agreement that Cypress transmitted to ISSI on June 9, 2015 (the “Prior Cypress Proposal”), which was the basis for your continued recommendation that ISSI stockholders approve the amended Agreement and Plan of Merger (the “Uphill Agreement”) with Uphill Investment Co. (“Uphill”). We believe that the Revised Definitive Merger Agreement transmitted herewith resolves all such concerns as described below:
"Our revised offer of $21.25 per share is clearly superior to the price offered by Uphill. Furthermore, we have introduced a ticking fee (as fully described in the Revised Definitive Merger Agreement), which will add an incremental $0.10 per share for each additional quarter required to obtain regulatory approval for a transaction with Cypress. This ticking fee will accrue daily starting on October 1, 2015 (the day after you expect the Uphill transaction to close) and will be payable by Cypress to ISSI stockholders at transaction close. The Uphill Agreement provides no such ticking fee.
"The Uphill Agreement allows ISSI to collect a reverse termination fee in certain scenarios where Uphill fails to obtain debt financing in order to close their proposed transaction, while the Prior Cypress Proposal did not offer such a reverse termination fee. Despite the fact that the Prior Cypress Proposal had no financing risk whatsoever, you pointed out the absence of such a reverse termination fee. While we think such a reverse termination fee is entirely unnecessary in our fully financed transaction, we have now included a reverse termination fee in the Revised Definitive Merger Agreement.
"The Presentation stated that the Uphill Agreement is “expected to close in third quarter calendar 2015 (with specific timing subject to CFIUS and Taiwan approvals),” while the Prior Cypress Proposal is “expected to close 6-9 months following signing a merger agreement.” As a result, you state that the “expected real value of the Cypress proposal is less than its stated price.” We strongly disagree with your view on the timing regarding the Prior Cypress Proposal as compared to the Uphill Agreement. We are confident that Cypress will obtain regulatory approval in a timely manner and that the Uphill Agreement presents no timing advantage. Nevertheless, the Revised Definitive Merger Agreement now incorporates the ticking fee described above. This ticking fee addresses the economic impact of any additional time required to obtain regulatory approval for a transaction with Cypress, which we do not expect will be required, and demonstrates our commitment to closing a transaction expeditiously.
"Given our revised offer of $21.25 per share, the $0.10 per share per quarter ticking fee and the other additional concessions provided in the Revised Definitive Merger Agreement, we have clearly addressed all outstanding issues and concerns relative to the Uphill Agreement. Compared to the Uphill Agreement, Cypress’s offer is now superior with respect to both price and terms. Therefore, we believe you should immediately recognize our offer as a Superior Proposal (as defined in the Uphill Agreement) and move expeditiously to execute the Revised Definitive Merger Agreement in accordance with the terms of the Uphill Agreement. Cypress also expects Institutional Shareholder Services (ISS) to withdraw its recommendation that ISSI stockholders vote in favor of the Uphill Agreement.
"The Revised Definitive Merger Agreement has been approved by Cypress’s Board of Directors and Cypress stands ready, willing and able to execute the Revised Definitive Merger Agreement once you have terminated the Uphill Agreement. Notwithstanding anything to the contrary contained herein, nothing in this letter constitutes a binding obligation of Cypress to proceed with or consummate a transaction. Any transaction between Cypress and ISSI will be subject to the execution by both ISSI and Cypress of the Revised Definitive Merger Agreement and other related agreements.
"As done previously, we are simultaneously releasing this letter to the public as we believe that it is in the best interest of ISSI and its stockholders to have full information regarding our commitment to expeditiously enter into this Revised Definitive Merger Agreement. The Revised Definitive Merger Agreement will be filed with the SEC on a form 8-K on June 18.
"We continue to look forward to working with you toward completion of a successful transaction," Sincerely, T.J. Rodgers President and Chief Executive Officer, Cypress Semiconductor.
