5 June 2015

GigOptix renews interest in acquiring GSI for $6.50 per share

GigOptix Inc of San Jose, CA, USA (a fabless supplier of analog semiconductor and optical communications components for fiber-optic and wireless networks) has renewed its proposal of 18 August 2014 to acquire GSI Technology Inc of Sunnyvale, CA, USA - a provider of static random access memory (SRAM) products primarily incorporated in networking and telecoms equipment - for $6.50 per share. This represents a 32% premium to the then share price, and a 10% premium to the highest price at which the shares have traded since GigOptix withdrew its offer on 14 November 2014. From 18 August to 14 November, GSI had rejected efforts to engage in a direct dialogue, says GigOptix.

In May, GSI announced the settlement of litigation with Cypress Semiconductor. "GSI Technology incurred over $30m in litigation expenses for which the net result was a wash to GSI," comments GigOptix's founder, chairman & CEO Dr Avi Katz in a letter to GSI's board. "This, despite setting unreasonably high expectations for your investors, such as the comment made during a May 2014 presentation at the B. Riley & Company investor conference, '[w]e put in our claim construction for damages recently… could be as little as few tens of millions to as high as hundreds of millions'," he adds.

"From an operating standpoint, we believe GSI Technology results continue to disappoint the investor community," says Katz. Revenues for GSI's fiscal 2015 (to end-March) were down 8.7% year-on-year. In contrast, for the quarter to end-March, GigOptix saw 23% revenue growth year-on-year. Moreover, GigOptix' initial guidance for fiscal 2015 is that revenue will grow about 14% over 2014.

"We believe that our proposal continues to represent a compelling value realization event for your stockholders and that a combination would create significant synergies between our businesses. In light of the economic position of the worldwide telecommunications market and the revenues which GSI Technologies has been reporting, we believe a combination would further enhance our collective product and service offerings, allowing us to strengthen the value proposition that we provide to our customers through a wider range of companion and complementary products and more effectively challenge our respective competitors," Katz continues.

Under its proposal, GigOptix would acquire all of the outstanding shares of GSI Technology common stock for $6.50 per share, consisting of a to-be-determined mix of (i) cash to be paid by GigOptix at the closing of the combination; (ii) shares of GigOptix; and (iii) a special dividend in cash payable by GSI, and conditioned upon the closing of the combination. GigOptix expects that the proposed transaction would be completed by the end of 2015. It is anticipated the cash consideration could exceed $6.00 per share.

The proposal represents a 26% premium above the closing price of GSI's stock of $5.14 on 2 June (amounting to about 3.5 times revenue and 4.0 times GSI's enterprise value).

GigOptix's proposal is subject to the negotiation of a definitive merger agreement, and receipt of necessary board, stockholder and regulatory approvals, as well as conducting certain limited confirmatory due diligence. GigOptix has again received a commitment letter of up to $70m from Opus Bank to fully finance the cash portion of the offer. "In addition, because a portion of the aggregate merger consideration would consist of GigOptix common stock, we would provide GSI Technology the opportunity to conduct appropriate limited due diligence with respect to GigOptix," says Katz. GigOptix has engaged Opus Bank as financial advisor and Crowell & Moring LLP as legal counsel to advise in the transaction. 

"We, our advisors and counsel are ready to meet with you and your advisors at any time to discuss this offer and answer any questions that you or they may have about our offer," says Katz to GSI's board. Unless extended, the proposal will expire on 19 June. "We believe this timeline provides GSI Technology's board adequate time to consider our proposal and respond accordingly," he adds. "This proposal represents a unique opportunity to create significant value for GSI Technology's stockholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to customers and stockholders." 

See related items:

GigOptix withdraws proposal to acquire GSI

GSI rejects proposed acquisition by GigOptix

GigOptix proposes to acquire memory product firm GSI for $161m

Tags: GigOptix

Visit: www.gsitechnology.com

Visit: www.gigoptix.com