Cypress Semiconductor Corporation Sends Letter To Board Of Directors Of Integrated Silicon Solution, Inc.

Cypress Semiconductor Corp.

today announced that it sent the following letter to the Board of Directors of Integrated Silicon Solution, Inc. Cypress Semiconductor Corp. logo June 2, 2015 John M. Cobb Chief Financial Officer and Vice President Finance and Administration Integrated Silicon Solution, Inc. 1623 Buckeye Drive Milpitas, California 95035 Mr. Cobb, On behalf of Cypress Semiconductor Corporation ("Cypress"), I am writing to respond to certain assertions in the June 1, 2015 press release issued by Integrated Silicon Solution, Inc. ("ISSI") regarding our offer to acquire all of the outstanding common stock of ISSI for $20.25 per share in cash. For the reasons described below, we strongly disagree that our offer poses the regulatory or financing risks you claim. Furthermore, on a comparative basis, we have a high degree of conviction that Cypress's proposal has far less timing and closing risk than the Agreement and Plan of Merger dated as of March 12, 2015 between ISSI and Uphill Investment Co. (as amended, the "Uphill Merger Agreement"). Regulatory The concerns articulated in the June 1 press release about antitrust risk and overlap between Cypress and ISSI in what you characterize as the "SRAM market" are misleading. We appreciate that there will be antitrust review processes that may address competitive interaction in some SRAM applications. However, we believe that the antitrust agency reviewers will see this to be a fundamentally procompetitive transaction within an exceptionally dynamic industry populated by many far larger players and customers. The SRAM overlap you highlight primarily concerns non-embedded SRAM for legacy sales, that is, for the installed base of sockets, which amounts to less than 2% of the sales of the combined companies. The overwhelming trend in the SRAM industry is a transition from standalone, non-embedded, SRAM chips to embedded SRAM solutions where neither Cypress nor ISSI is a significant supplier. In the past 10 years standalone SRAM sales have declined by approximately 85%. Notwithstanding this severe decline, there still are numerous other existing non-embedded SRAM suppliers able to meet these installed base needs of sophisticated and powerful customers that have significant control over their supply chain and component partners. The predominant competition for new applications at the design stage includes a myriad of powerful suppliers of embedded SRAM and of other competing memory technologies. The far more important overriding reality is that the proposed merger between Cypress and ISSI would combine a range of complementary product lines and businesses, enabling the merged enterprise to offer a more complete product and solution portfolio, in line with other full service global chip suppliers. Customers throughout industries now served by those global leaders will benefit from the ability of the merged firm to meet more of their current needs and to become a strong force in the innovation and development of next-generation technologies and solutions for their future needs. In this light, the merger will be seen -- by customers and reviewing authorities alike -- as fundamentally procompetitive. This same procompetitive transaction logic is a primary driver of the accelerating consolidation underway in the semiconductor market. More specialized companies are combining to offer complete and compelling product solutions to large, global customers interested in sourcing component solutions from strong, full-service suppliers. Nonetheless, in a further effort to obviate any antitrust concern, and confirm that Cypress is not seeking to limit competition for embedded or standalone SRAM suppliers, we are now clarifying the licensing commitment set forth in our side letter of last Friday. Specifically, we are incorporating an open-ended, customer-driven, multiple-license commitment into the proposed merger agreement, and we are also making clear that our reasonable, best-efforts obligation to address any agency antitrust concern includes, but is not limited to, that licensing commitment. ISSI Regulatory Concerns Any antitrust concerns you raise, which we have gone to great lengths to put to rest, pale in comparison to the far more daunting CFIUS and Taiwan regulatory issues in the Uphill Merger Agreement. The purchasers in the Uphill Merger Agreement are foreign entities. CFIUS (a U.S. government inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person) has previously stated that there are national security concerns when considering foreign control of semiconductor manufacturers. Moreover, because key U.S. industrial, communications and aerospace and defense customers rely on ISSI's semiconductor products for their sockets, foreign-control of ISSI also raises significant U.S. infrastructure concerns. The Uphill Merger Agreement and its dollar limitation on divestiture does not meaningfully address this risk. In addition, we note, that CFIUS can be a lengthy and complicated process. For example, in another current acquisition attempt, regulatory agencies have delayed, now by more than 10 months, an acquisition of a U.S. chip maker by a foreign investment group affiliated with Uphill Investment Co. In addition, ISSI has already acknowledged the significant Taiwan regulatory risk in the Uphill Merger Agreement. Key ISSI assets and a majority of its personnel are located in Taiwan, and ISSI acknowledges the prospect of a complicated divestiture process subject to Taiwan governmental review. Clearly, the regulatory and timing uncertainties presented in the Uphill Merger Agreement are significantly greater than any conceivable issues in a transaction between our two companies. Financing We deleted from the draft Agreement and Plan of Merger that you delivered to us (the "Cypress Merger Agreement") your suggested language that Cypress be required to deliver an executed commitment letter from its lender in connection with entering into the Cypress Merger Agreement. As we explained to you previously, including a requirement that a purchaser provide the seller with an executed commitment letter is more typical for an LBO or a merger transaction involving a buyer with a poor credit rating or a buyer from certain foreign countries, including the People's Republic of China; however, it is not typical in cases where the purchaser in a merger transaction is a large, well-established and financially sound U.S. publicly-traded company with the financial means and wherewithal to secure any required financing. Nevertheless, in order to address your continued assertions regarding financing risk, we are willing to share with you a draft financing commitment letter from Barclays Bank PLC (the "Financing Commitment") evidencing that Cypress will have the requisite financing, under very competitive terms, to complete the transaction. We will execute the Financing Commitment simultaneously with execution of the Cypress Merger Agreement. Therefore, our proposal fully addresses any and all financing concerns. Timing Assuming full cooperation from you, Cypress expects to complete its due diligence by Friday, June 5, 2015 and to execute definitive agreements, including the Cypress Merger Agreement, by Sunday June 7, 2015. It is in the best interest of your stockholders, and ours as well, to finalize a transaction as soon as possible. Notwithstanding anything to the contrary contained herein, nothing in this letter constitutes a binding obligation of Cypress to proceed with or consummate a transaction. Any transaction between Cypress and ISSI will be subject to approval by our board of directors and the execution by Cypress of the Cypress Merger Agreement and other acceptable definitive agreements. As we said two weeks ago, we would have preferred to participate in your sale process, but were surprisingly not contacted. As such, we are simultaneously releasing this letter to the public as we believe that it is in the best interest of ISSI and its stockholders to have full information regarding our proposal. We look forward to working with you toward completion of a successful transaction. If you have any questions regarding our proposal, please contact our bankers at Greenhill & Co. Sincerely, Thad Trent Chief Financial Officer