US chipmaker Cypress in $4-bn merger deal with peer Spansion

Cypress Semiconductor Corp, a world leader in touchscreens for smartphones and trackpad solutions for notebook PCs, has agreed to merge its business with Spansion Inc, a world leader in embedded systems, in an all-stock deal valued at approximately $4 billion.

The merger of the two leaders is expected to create a leading global provider of microcontrollers and specialized memories for embedded systems.

Under the terms, Spansion shareholders will receive 2.457 Cypress shares for each of their shares.

Further to the news of the deal, Spansion shares surged 18 per cent to trade at $27 during extended hours yesterday on New York Stock Exchange, higher than Cypress's offer of $25.63, based on Monday's closing price.  The Cypress stock was up 12.5 per cent at $11.74 in after hours of trading.

Shareholders of both the companies will have approximately equal ownership in the merged entity, which will be known as Cypress Semiconductor Corporation.

''This merger represents the combination of two smart, profitable, passionately entrepreneurial companies that are No. 1 in their respective memory markets and have successfully diversified into embedded processing.  Our combined company will be a leading provider of embedded MCUs and specialized memories,'' said T.J. Rodgers, Cypress's founding president and CEO.

The merger will yield synergies to the tune of $135 million in three years and generate over $2 billion in annual revenue, according to Cypress.

San Jose, California-based Cypress's products include programmable system-on-chip families PSoC1, PSoC3, PSoC4 and PSoC5LP. The company's CapSense touch sensing and TrueTouch touchscreens as well as USB controllers have a world leading position in their respecting areas. Cypress is also the world leader in SRAM and nonvolatile RAM memories.

The company's products serve numerous major markets, including consumer, mobile handsets, computation, and data communications, automotive, industrial and defence.

Cypress, founded in 1982, has around 3,300 employees and reported revenue of $723 million in 2013. Global smartphone giant Samsung Electronics Co accounts for about 12 per cent of the company's revenue.

Sunnyvale, California-based Spansion makes flash-memory based embedded systems and solutions. The company, founded in 1993 as a joint venture between Advanced Micro Devices (AMD) and Japan's Fujitsu Ltd and known as FASL LLC, was taken over by AMD in 2003 and was renamed Spansion LLC and later spun off as an independent maker of flash memory chips in late 2005. Last year, Spansion bought Fujitsu's microcontroller analog business for $175 million.

The company currently has around 3700 employees and its 2013 turnover was approximately $1.3 billion.

Spansion's microcontroller chips have seen strong demand from automakers in recent times contributing to the company's revenue growth, in addition to its flash-memory based systems business.

Rodgers will continue to be the CEO of the merged entity while Spansion's chairman Ray Bingham will serve as its non-executive chairman. The new eight-member board of directors will comprise four members each from both the companies.

''With unparalleled expertise, global reach in markets like Japan and market-leading products for automotive, internet of things (IoT), industrial and communications markets, the new company is well positioned to deliver best-of-breed solutions and execute on our long-term vision of adding value through embedded system-on-chip solutions.'' John Kispert, CEO of Spansion.

The transaction is expected to close in the first half of 2015 subject to customary closing conditions including approval of shareholders of both the companies as well as regulatory clearances from the US, Germany and China.

Jefferies LLC and Morgan Stanley & Co. LLC served as financial advisors to Spansion on the deal while Cypress was advised by Qatalyst Partners.