Two longtime semiconductor companies, Cypress and Spansion, have agreed to merge in an all-stock $4 billion deal. The deal represents the trend toward consolidation of giants in the semiconductor industry, which is the foundation of all electronic devices.
The Silicon Valley chip makers say they will create a company that provides microcontrollers and specialized memory chips for embedded systems. That means that the company will position itself as the maker of chips for the Internet of Things, or making everyday objects smart and connected.
The deal is a “merge of equals,” but the surviving company will be known as Cypress Semiconductor. The combined company will be strong in automotive, industrial, and the Internet of things. Estimated revenues will be about $2 billion.
The company will be No. 1 in NOR Flash memory chips as well as SRAM memory chips. T.J. Rodgers, chief executive of Cypress, will serve as CEO. Ray Bingham of Spansion will become non-executive chairman
“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,” said Rodgers, Cypress’s founding president and CEO, in a statement. “Our combined company will be a leading provider of embedded MCUs and specialized memories. We will also have extraordinary opportunities for EPS accretion due to the synergy in virtually every area of our enterprises.”
Under the terms of the agreement, Spansion shareholders will receive 2.457 Cypress shares for each Spansion share they own. The shareholders of each company will own approximately 50 percent of the post-merger company. The company will have an eight-person board of directors consisting of four Cypress directors, Rodgers and Eric Benhamou, and four Spansion directors, including John Kispert (Spansion’s CEO) and Bingham, who was formerly Spansion chairman.
The new company will be based in San Jose, Calif.
The merger is expected to achieve more than $135 million in cost savings on an annualized basis within three years.
“Bringing together these high-performing organizations creates operating efficiencies and economies of scale, and will deliver maximum value for our shareholders, new opportunities for employees, and an improved experience for our customers,” said John Kispert, CEO of Spansion, in a statement. “With unparalleled expertise, global reach in markets like Japan and market-leading products for automotive, 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.”
The deal is expected to close in the first half of 2015, and it is subject to a variety of closing conditions.
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