A recent development was witnessed in the long-drawn bidding war between Cypress Semiconductor Corporation CY and Uphill Investment Co to take over Integrated Silicon Solution Inc. ISSI.
Cypress recently raised its offer price again for all the outstanding stock of Integrated Silicon to $22.60 or a total of $717.8 million.
Cypress made an initial offer of $19.75 per share earlier in May and gradually raised it to $22.60 to better compete with China's Uphill Investment. According to Cypress, this is the maximum price justified for Integrated Silicon, which still falls short of Uphill's raised offer price of $23 a share or $730.5 million in total.
California-based Integrated Silicon manufactures integrated circuits for auto, communications, industrial and digital consumer markets. Its products include high-speed and low-power SRAM, and low and medium density DRAM, NOR flash products, and analog and mixed signal integrated circuits. In the second quarter of fiscal 2015, the company reported revenues of $80.1 million with a net profit of $1.1 million.
In our opinion, this is a highly profitable deal for Cypress for a number of reasons. Firstly, being a fabless company, Integrated Silicon would fit seamlessly into Cypress’ low capex manufacturing strategy. Also, Integrated Silicon has the flexibility to move the manufacturing, assembly and testing of products to vendors offering superior technology and services at competitive prices. As a result, resources, which would otherwise have been locked up in capital assets, can be channelized toward research and development.
Integrated Silicon’s products would supplement Cypress’ products, especially in the auto and communication markets, including SRAM and DRAM chips. If the deal materializes, it would definitely bring synergies on the sales side for Cypress by helping it to continue to shift focus to automotive customers. The buyout will further strengthen its leadership position in the semiconductor integrated circuits market and expand its market share.
Cypress is a semiconductor company offering high-performance, mixed signal, programmable solutions. In the first quarter of 2015, the company incurred a loss of 53 cents per share, significantly disappointing the Zacks Consensus Estimate of earnings of a penny. However, revenues of $209.1 million jumped 13.6% sequentially and 22.8% year over year.
The semiconductor industry is going through a massive consolidation phase. With both Uphill and Cypress competing aggressively to acquire Integrated Silicon, only time will decide the winner.
Currently, Cypress has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same sector are Broadcom Corp. BRCM and NeoPhotonics Corporation NPTN, both sporting a Zacks Rank #1 (Strong Buy).
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