Loading...
Loading...
Pericom Semiconductor
Corporation ("Pericom" or the "Company")
PSEM today announced that
its Board of Directors sent a letter to its shareholders urging them to vote
"FOR" the previously announced merger agreement (the "Diodes Agreement")
with Diodes Incorporated ("Diodes")
DIOD, pursuant to which
Pericom shareholders are entitled to promptly receive $17.00 per share in
cash, subject only to Pericom shareholder approval. The letter, a copy of
which is included below, addresses the Board's significant concerns with the
clear and fundamental risks associated with the offer made by Montage
Technology Group Limited ("Montage"), including risks and uncertainties
regarding Montage's ability (or unwillingness) to obtain financing and
regulatory approvals for an acquisition of Pericom and Montage's ability to
ultimately close a transaction with Pericom in a timely fashion, if at all.
The letter to shareholders also responds to and clarifies a number of
misleading statements that Montage has repeatedly made in communications to
Pericom shareholders in its effort to conceal the significant risks
associated with Montage's offer.
Pericom has mailed a white proxy card to its shareholders in connection with
its Special Meeting of Shareholders (the "Special Meeting"), which is
scheduled to be held on November 20, 2015. The Special Meeting is being
called primarily to seek shareholder approval of the Diodes Agreement.
Pericom shareholders of record as of the close of business on September 22,
2015 are entitled to vote at the Special Meeting.
In connection with the Special Meeting, Pericom has filed an investor
presentation with the U.S. Securities Exchange Commission ("SEC") detailing
the rationale for the Board's unanimous approval of the Diodes Agreement and
the Board's unanimous decision to reject the inferior offer from Montage
based on the significant and unacceptable risks associated with that offer.
November 5, 2015
Dear Shareholders,
A Special Meeting of Shareholders of Pericom Semiconductor Corporation will
be held on November 20, 2015, at which you will be asked to approve the
Agreement and Plan of Merger between Diodes Incorporated and Pericom, dated
September 2, 2015 (the "Diodes Agreement"). The Pericom Board of Directors
unanimously recommends that Pericom shareholders vote "FOR" the acquisition
of Pericom by Diodes. Your vote in support of the proposed acquisition by
Diodes is essential to lock in the substantial cash premium represented by
the $17.00 per share purchase price offered by Diodes, which we believe is
clearly in the best interests of Pericom shareholders.
THE MONTAGE OFFER IS CLEARLY NOT IN THE BEST INTERESTS OF PERICOM
SHAREHOLDERS BECAUSE THE HIGHLY UNCERTAIN PREMIUM IS INSUFFICIENT TO
OUTWEIGH THE SIGNIFICANT TIMING AND DEAL CERTAINTY RISKS ASSOCIATED WITH THE
OFFER
In summary, the key elements of the Montage Offer that the Pericom Board of
Directors find most troubling are:
-- Despite its claims, the one-page financing letters provided by Montage's
lenders are not full commitments to finance a transaction with Pericom;
-- For example, the one-page letter from the Bank of China Shanghai
Pudong Branch states that any financing to be provided to Montage
"needs to be evaluated by [Bank of China's] committee and will
not
be issued until all the conditions that [Bank of China] requires
and admits are fully satisfied". However, the Bank of China
Shanghai Pudong Branch's letter does not include any details
regarding what those conditions may be and, despite repeated
requests, Montage has not provided any further information
regarding such conditions.
-- Montage has removed regulatory approvals as a condition to closing
although they still must be obtained for a lawful closing;
-- Cannot contract away the oversight of third party regulators and
to suggest such an action demonstrates a move to hide the facts
-- Because Montage is a Cayman company with few assets in the United
States,
enforcement of any judgment against Montage will be problematic -- a
risk
Montage itself clearly stated in its IPO prospectus; and
-- If for any reason, Montage is unable or unwilling to close the proposed
transaction with Pericom, the only real recourse for Pericom
shareholders
may be the $43 million reverse break-up fee (vs. $400 million of market
premium from Diodes).
As you may know, subsequent to signing the Diodes Agreement, the Pericom
Board received an unsolicited acquisition offer from Montage Technology
Group Limited ("Montage") with a proposed purchase price of $18.50 per share
(the "Montage Offer"). Clearly, the additional $1.50 per share premium
compared to the price offered by Diodes merited serious consideration by the
Pericom Board. However, the Pericom Board has a duty to obtain the highest
value reasonably available to our shareholders, and in carrying out such
duty, the Pericom Board must consider all factors, including the likelihood
of completing a transaction. Accordingly, we devoted a significant amount of
time and resources to fully evaluating the Montage Offer and conducted a
thorough analysis and comparison of the Montage and Diodes offers to
determine what is in the best interests of our shareholders.
After careful consideration and extensive consultation with our independent
financial advisor, Cowen and Company, and outside legal advisors, including
Latham & Watkins and Lee & Li, and extensive discussions and negotiations
with Montage and its advisors, the Pericom Board of Directors unanimously
determined that the premium represented by the Montage Offer is highly
uncertain, does not outweigh or adequately compensate our shareholders for
the very real possibility that Montage would not be able to close an
acquisition of Pericom, and is clearly not in the best interests of our
shareholders.
As discussed in greater detail below, the Board's unanimous decision was
based, in part, on the serious doubts and concerns that the Board has with
respect to Montage's ability to obtain the financing and regulatory
approvals necessary to consummate an acquisition of Pericom.
-- Despite numerous and repeated requests by Pericom, both prior to and
following execution of the Diodes Agreement, Montage has refused to
provide customary, reliable or sufficient financing commitments to
consummate a transaction with Pericom. The only reasonable conclusion
that can be drawn from Montage's otherwise inexplicable failure to
provide such commitments despite having repeated opportunities and many
months to do so is that Montage is indeed unable to actually secure such
financing.
-- Montage has also dismissed and failed to thoughtfully consider the
implications of, or even how it plans to address, the myriad of
regulatory approvals that will be required in connection with an
acquisition of Pericom, including approvals from numerous governmental
agencies in the People's Republic of China (PRC) and Taiwan (which will
almost certainly require divestiture of Taiwanese assets by Pericom) and
from the Committee on Foreign Investments in the U.S. (CFIUS). Indeed,
rather than actually addressing Pericom's concerns with respect to the
regulatory approvals required in a revised offer received November 4,
Montage avoids the issue entirely by simply eliminating any requirement
that regulatory approvals be obtained. While this might be the quickest
way to "address" Pericom's concerns with respect to regulatory
approvals,
regulatory oversight cannot be contracted away, and an acquisition of
Pericom by Montage will still be subject to regulatory filings and
regulatory scrutiny. Simply stated, Pericom's concerns with respect to
obtaining regulatory approvals have not been cured by Montage's hasty
attempt to contractually do away with legally required approvals.
We believe Montage is consistently misrepresenting the one-page financing
letters as "committed financing" and challenge Montage to be transparent
with investors and make available the one-page financing letters as provided
by Bank of China Shanghai Pudong Branch and CEC. Despite repeated requests
and many months to do so, Montage has yet to provide the Pericom Board with
any level of reasonable assurance that it has secured committed financing or
that it has a legitimate plan to obtain regulatory approvals. As a result,
the Montage Offer asks Pericom shareholders to sacrifice a highly certain,
near-term $17.00 per share offer from Diodes in the hopes of obtaining, at
some point in the future, if at all, a highly uncertain premium from a buyer
who has consistently failed to address the material risks associated with
its offer. We believe that there is a substantial risk that pursuing a
transaction with Montage would leave our shareholders holding the bag, with
nothing more than a $43 million reverse breakup fee (which amounts to less
than 11% of the $400 million value represented by the premium offer from
Diodes) as compensation if Montage cannot (or chooses not to) close the
deal.
Loading...
Loading...
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in