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Cypress' bid to buy ISSI faces roadblock

Posted: 10 Jun 2015     Print Version  Bookmark and Share

Keywords:antitrust  merger  SRAM  automotive manufacturer  ADAS 

Antitrust concerns prevented Cypress Semiconductor from attaining its latest acquisition ambition.

Integrated Silicon Solution, Inc. (ISSI) announced in a statement that Cypress Semiconductor, despite having nearly fully negotiated the agreement, failed to finalise the merger agreement because of outstanding antitrust issues. Although Cypress was able to complete extensive due diligence and hold numerous meetings with ISSI's management team, the only remaining point of difference was the treatment of the antitrust risks of the transaction, which ISSI said would present significant antitrust risks in both the United States and Germany, and that it would be unlikely to close. ISSI determined that anti-trust filings for the transaction would be required in the United States and Germany and possibly other jurisdictions.

In the United States, both the Federal Trade Commission and the Department of Justice have 30 days to review a filing and determine whether to issue the parties a burdensome subpoena for documents and information. This "second request" is rather likely as Cypress and ISSI are head-to-head competitors with significant market share in the SRAM market, the latter said in its statement, and could cost each party more than $3 million. It could also take up to nine months to complete, and result in divestiture of at least a portion of the SRAM business. In Germany, ISSI believes the combined market share of Cypress and ISSI would exceed 70 per cent and that the combined company would be the sole supplier of SRAM to German automotive manufacturers.

Wearable electronics

Cypress Semiconductor sees the requirements of wearable electronics driving the resurgence of SRAMs, as well as the automotive sector.

ISSI's statement that the merger would not go forward came right on the heels of Cypress sharing a financing commitment letter to ISSI from Barclays Bank PLC that it announced in a press release, stating it "can now confirm it has received a financing commitment letter on competitive terms from Barclays and shared the letter with ISSI. This financing commitment further strengthens Cypress's offer and demonstrates Cypress's determination to close a transaction."

Acquisition rumblings began in mid-May when Cypress sent a letter to the board of directors of ISSI, proposing an acquisition of all outstanding shares. The offer, for $19.75 per share in cash, trumped one made by a Chinese consortium led by Summitview Capital, reported Reuters, and valued ISSI at $627.3 million.


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