Cypress Pursues Hostile Takeover of Ramtron

Cypress Semiconductor Corp. (Nasdaq: CY) has launched a new hostile bid for memory semiconductor vendor Ramtron International Corp. (Nasdaq: RMTR), offering to pay a premium of 37 percent on the target company's latest stock closing price. It was the same premium Cypress offered for the company last year, but the valuation is lower this time due to recent declines in Ramtron's market value.

The latest bid comes two years after Cypress first broached the subject with the management of Ramtron and more than a year since the initial overtures were rejected by the target acquisition. In a public letter addressed to William Howard and Eric Balzer -- Ramtron's chairman of the board of directors and CEO, respectively -- Cypress charged the management with not working in the "best interest" of the stockholders.

Cypress is making an all-cash, "no-financing or due diligence conditions" offer for Ramtron, demonstrating its conviction that the acquisition is in its own interest and eagerness to quickly wrap up the transaction. The offer, Cypress said, "would deliver immediate, certain value to Ramtron's stockholders that is far superior to what we believe that you can reasonably expect to achieve as a standalone company."

The formal offer from Cypress, a supplier of high-performance, mixed-signal, and programmable semiconductor products, is for $2.48 per share, or approximately $85 million based on the number of Ramtron's shares outstanding.

It represents a 37 percent premium on the closing price of Ramtron's stock on Monday. This is the same premium Cypress offered last year, but Ramtron's shares have since declined sharply and at one point fell to a 52-week low of $1.65. They rallied after Cypress made its offer and have risen about 35 percent today on expectations the two companies will eventually conclude the deal.

Ramtron's management, despite the public drubbing and hostile nature of the Cypress offer, may have boxed itself into a corner and will probably have to agree to the sale. Investors seem to be in support of the deal, although I expect the management to try and seek better terms, which Cypress may be inclined to give, just so it can avoid further acrimonious and public discussions. Cypress aims to use the deal to boost flagging sales and secure, valued IP assets in the specialized semiconductor memory and microcontroller markets.

Cypress also seems ready to bypass Ramtron's management this time and has indicated it would take additional forceful steps to clinch the deal. T.J. Rodgers, president and CEO of Cypress, expounded on this in his letter to the Ramtron team:

We hope to work with you on a negotiated basis to complete this transaction successfully, and are prepared to deliver a draft merger agreement and begin discussions immediately. Although we would prefer to proceed through a negotiated agreement, we are fully committed to this transaction, and will take the steps necessary to complete it. We believe that a transaction between our two companies would be well received by your stockholders, and we are committed to providing them with an opportunity to express their views on our proposal.

The translation is simple: If Ramtron's management again rejects Cypress's offer, it will launch a hostile bid for control of the company's board of directors and take the bid directly to shareholders.