Cypress Closes Ramtron Buyout

Zacks

Cypress Semiconductor Corporation (CY) recently announced that it has completed its acquisition of Colorado Springs-based Ramtron International Corp. for a total of $109.8 million or $3.10 per share in cash.

The Gazette of Colorado Springs stated that Ramtron’s CEO Eric Balzer and three other top executives left the company. Almost 140 employees were laid off following the takeover.

Post acquisition, Cypress plans to consolidate two of Ramtron’s Colorado Springs locations into one and make that facility the headquarters for the company’s non-volatile memory chip business.

Cypresshad been pursuing its rival semiconductor company Ramtron for months. Cypress made its first public offer of $2.48 per share in June, revised it to $2.68 in July and $2.88 in August. Each offer was rejected, on grounds that it was inadequate, until Cypress made an offer of $3.10 per share in September. The final deal represents a premium of 71% to Ramtron’s closing price of $1.81 per share on June 11.

Ramtron International is a fabless semiconductor company with about 34.0 million shares outstanding. It supplies ferroelectric random access memories and has Texas Instruments Inc. (TXN) and Toshiba Corp. as manufacturing partners.

We believe the deal makes sense for Cypress for a number of reasons. First, Ramtron is a fabless company and would fit very well into Cypress’ low capex manufacturing strategy. Being a fabless company, Ramtron relies on partners for manufacturing, assembly and testing of products that offer superior technology and services at competitive prices.

Second, Ramtron’s ferroelectric-RAM (F-RAM) will likely supplement Cypress’ Memory Products Division, which includes Asynchronous SRAMs, Synchronous SRAMs and nvSRAMs, and provide a longer-term roadmap for its non-volatile memory market. Ramtron’s F-RAM enables read-writes with very little delay, low power consumption, and high endurance with limited memory loss.

The F-RAM is also competitive with some of the newer technologies such as Phase-change-RAM. The Memory Products Division segment generated 43.5% of revenue in the third quarter and was up 6.4% sequentially. The sequential increase came on the back of strong demand in the static random access memory (:SRAM) business and certain one-time benefits related to patent sales and increases in Sync business.

The impact of the deal on Cypress’ financials is unknown but it will definitely bring synergies on the sales side.

Cypressis a semiconductor company offering high-performance, mixed signal, programmable solutions. In the third quarter, Cypress reported earnings of 12 cents, beating the Zacks Consensus Estimate of 5 cents. The improved gross margins and tight operating expense control contributed to the upside in earnings.

Currently, Cypress has a Zacks #3 Rank, implying a short-term Hold rating.

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