NEW YORK (The Deal) -- Chipmaker Integrated Silicon Solution (ISSI) has reached an agreement to be acquired by Cypress Semiconductor (CY) following a month-long bidding battle, but people who follow the target wonder if the tug-of-war for the Milpitas, Calif., company is truly over.
ISSI announced Wednesday that it has finalized a definitive agreement to be acquired by the much larger Cypress for $20.25 per share. Based on the 31.76 million outstanding shares of the target, Cypress' offer is valued at about $643 million.
The target said that San Jose, Calif.-based Cypress has agreed to take "all reasonable actions" to obtain regulatory approval for the acquisition, including the divestiture of ISSI's SRAM memory chip business, if necessary.
ISSI had been the subject of a bidding war between Cypress and a consortium of Chinese investors operating under the name Uphill Investment since mid-May. ISSI had initially agreed in March to be acquired for $19.25 per share by Uphill Investment, in the midst of an activist campaign by Starboard Value. Cypress launched a spoiler bid for ISSI on May 13 and has been duking it out with Uphill investment ever since.
The ISSI board has already recommended the Uphill Investment offer and isn't modifying it, but the company said the board is prepared to revise that recommendation if Uphill Investment doesn't increase its bid.
Uphill Investment has until 5 p.m. PT Sunday to increase its offer, and ISSI has notified Uphill Investment that its board is ready to approve or recommend the Cypress offer and terminate the agreement with Uphill Investment if it doesn't. A special meeting for shareholders to conduct a vote that was scheduled for Friday has now been postponed to June 19.
The big question now is whether Uphill Investment will make another bid, said a source close to the matter via phone Wednesday.
"I don't think they're going to keep bidding against Cypress," the source said of Uphill Investment, wondering whether the consortium's wherewithal to bid is meeting its threshold. This person said Cypress was never notified that ISSI was on the market and wasn't given the opportunity to participate in the sale process.
The Deal previously reported that Cypress was an obvious strategic buyer for ISSI and had long been interested in acquiring the target. ISSI, however, rebuffed Cypress' attempts to start talks. "They had a buyer out there who was prepared to pay $20.25," the source said.
When considering the termination fee of around $19 million Cypress would pay to Uphill on a per-share basis, ISSI could have received a price tag of about $21 per share from Cypress.
"I would say chances of higher bids are greater than 50%," said Richard Shannon, an analyst at Craig-Hallum Capital Group, by phone Wednesday. At the same time, it is difficult to tell how strong the motivations of Cypress and Uphill Investment are, he said. After all, Uphill Investment has the support from the Chinese government, which has been vocal about wanting to grow its domestic chip business.
"It took a little bit of time for Cypress to figure out what they wanted to do," Shannon said. "They had to commit to sell the business and make this deal happen."
Cypress, he said, would be purchasing ISSI primarily for its DRAM memory chip and automotive businesses.
Shannon said that if Cypress is required to sell ISSI's SRAM assets, GSI Technology (GSIT), Renesas Electronics, Winbond Electronics and Macronix International would likely be interested in buying them. Officials at those companies didn't return calls.