Cypress Semiconductor Offers Rival Bid for Integrated Silicon Solution

NEW YORK (The Deal) -- Cypress Semiconductor  (CY) has launched a bidding battle for the Milpitas, Calif.-based Integrated Silicon Solution  (ISSI), just two months it agreed to be acquired by a Chinese consortium of investors in amid a campaign by activist investor Starboard Value.

Cypress Semiconductor said Wednesday after markets closed that it had offered to acquire Integrated Silicon for $19.75 a share in cash, in a deal worth about $627.3 million.

"We believe that our proposal clearly constitutes a superior proposal," T.J. Rodgers, CEO and president of Cypress, wrote in a letter to Integrated Silicon's board. "Cypress and its financial and legal advisers [are] ready to engage in discussions regarding our proposal immediately.

"We would have preferred to participate in your sale process, but were not contacted," Rodgers added.

Shares of Integrated Silicon Solution shot up more than 7% on Thursday morning to $20.09, giving the company a market capitalization of $638.3 million. The stock's price at the market's close was $20.14.

Cypress' share price rose about 2.6% on Thursday morning, to $12.98, giving the San Jose, Calif.-based chipmaker a market capitalization of about $8.6 billion. At the market's close, the shares was $13.14.

For Integrated Silicon, the bid from its larger peer comes after it agreed in March to a sale to a consortium of private equity firms led by Summitview Capital for $19.25 per share in cash, or about $611.4 million. The consortium also includes eTown MemTek, Hua Capital Management and Huaqing Jiye.

About four months before the consortium made its bid, Jeffrey Smith's Starboard Value launched an activist campaign at Integrated Silicon along with fellow hedge fund Oliver Press Partners in late November.

The duo argued that Integrated Silicon's shares were trading at a substantial discount to those of its peers partly because of its noncore acquisitions and that the company should focus on profitable and growing core businesses.

Back then, the activists also pointed to issues with the company's board structure. They asserted there might be potential conflicts of interest because the vice chairman of the board is also the company's executive vice president reporting to the CEO, but the CEO also has to report to the board. The shareholders said they intended to nominate five directors to the company's board at its annual meeting.

A source familiar with the situation had told The Deal at the time that while a number of companies had approached Integrated Silicon in the past, the board had not been open to discussions about the company's being acquired.

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