Cypress Semiconductor is weighing a move next week to make a tender offer for rival ISSI in what could be the next activist-fueled semiconductor merger, The Post has learned.
Integrated Silicon Solution Inc. on Monday acknowledged it received Cypress’ unsolicited $20.25 a share offer — slightly more than the sweetened $20 a share deal it reached with a group of Chinese venture capital firms bidding under the holding company Uphill Investment — but the supposed bad blood between the two chip makers doesn’t appear to leave much hope of a deal, sources said.
A special meeting of ISSI shareholders is scheduled for June 12 to vote on the Uphill offer.
ISSI will furnish Cypress with more information — or will start negotiating with the San Jose, Calif., business — regarding its $680 million proposal, ISSI said.
But “the companies hate each other,” a source close to the situation said — predicting that ISSI will likely not agree to a Cypress deal. For that reason, the source added, Cypress is preparing to launch a tender offer next week.
While it could not be learned how high the Cypress tender offer may go, an enhanced offer of, say, $21 a share, could persuade ISSI shareholders not to approve the Uphill deal, one trader said.
ISSI was trading Tuesday morning at $20.68, down 2 cents, in heavy trading.
The takeover tango is one of a handful in the chips sector as firms look to hook-up to combat the increased costs now needed to stay competitive.
Uphill first bid $19.25 a share for ISSI — which Cypress topped with an offer of $19.75. Uphill sweetened its bid, to $20, which got ISSI to agree, Cypress then upped its offer to $20.25.
Shareholder activist Starboard Value is ISSI’s biggest holder with 11.2 percent of the stock.
Over the past few months activists including TIG Advisors successfully pushed chip maker Altera to re-engage with Intel after Altera had rejected Intel’s $54 a share offer.
The Post was the first to report talks had resumed, and then broke the news last week that the sides were close to a $54 deal that was announced Monday.
There are reasons to believe both the Chinese and Cypress bids for ISSI are somewhat suspect.
Cypress has regulatory risk in buying ISSI, and likely would need to make “material divestitures” to get it through US regulators, the source said.
ISSI on Monday, while saying it would engage with Cypress, also said, “If Cypress were to acquire ISSI, the combined company would represent a very high percentage of the SRAM market in the US, and would be the largest supplier of SRAM to the global automotive market.”
SRAM is a fast way to keep data in the memory of a processing unit to help boot up an electronic device. Cypress and ISIS make SRAM chips used to turn on rear view cameras in cars and auto entertainment programs.
Also, ISSI said on Monday it had concerns with how Cypress could finance the deal.
However, there is question too whether an Uphill-ISSI deal would get regulatory approval from the Committee on Foreign Investment in the United States (CFIUS), sources said.
ISSI has contended it only does $1 million annually in US government business.
A Cypress spokesman did not return calls. ISSI declined comment.