The lengthy duel between a Silicon Valley chip company and a Chinese investment group may be over.
Cypress Semiconductor made its final offer for Milpitas memory chip company Integrated Silicon Solution Inc. late Wednesday with a lower but superior bid than its rival Uphill Investment.
The offer of $22.60 a share, or about $752 million, is lower than one by Uphill Investment, a consortium of Chinese venture and private equity groups. Uphill is offering $23 a share, or about $765 million.
I hereby submit our best and final offer for Integrated Silicon Solution, Inc., Cypress CEO T.J.Rodgers wrote in a letter to ISSI s Executive Chairman Jimmy Lee.
Rodgers claimed the Cypress offer is superior to Uphill s because the Chinese consortium will have to clear a big hurdle in Washington D.C. As a foreign buyer, it needs an O.K. from the Committee on Foreign Investment in the U.S., an interagency group that rules on foreign purchases of sensitive U.S. technology.
CIFIUS recently approved the purchase of Silicon Valley imaging chip maker Omnivision by a related group of Chinese investors after a lengthy delay. On the other hand, it also barred Intel from supplying technology to a Chinese supercomputer project earlier this year.
Cypress has its own hurdle to clear: it must gain antitrust approval for the deal, since it and ISSI are among the top suppliers of a type of memory chip called SRAM.It has offered to pay a 10-cent per share ticking fee for every quarter the deal fails to close after October. It also offered to divest ISSI s SRAM business if regulators require it.
Uphill is an entity created for the deal. The consortium is led by Summitview Capital, a venture capital and private equity fund focusing on the semiconductor industry in China. Other members are Beijing-based eTown MemTek; Beijing Integrated Circuit Design and Test Fund managed by Hua Capital Management, and Hauling Jiye Investment Management.
In a bird in the hand warning, Rodgers wrote that if ISSI s board goes with Uphill, and the deal fails to close, Cypress will probably be back – with a substantially lower offer.
Finally, we fully expect that Uphill, with its backing from the Chinese government, will increase its offer price subsequent to the release of this letter, thereby acknowledging and attempting to compensate for the higher level of risk in completing their transaction, Rodgers wrote.
China has announced plans to bolster its domestic chip industry and has vowed to spend $100 billion through 2020 on investment, acquisition and innovation in its relatively small chip business.
Phone: T.J. Rodgers, founder, president and CEO of Cypress Semiconductors. (Nhat V. Meyer/Mercury News)
