Cypress Semiconductor Corp. and Spansion Inc. said Monday (Dec. 1) they have entered into a definitive agreement to merge in an all-stock deal worth about $4 billion.
The combined company, with annual revenues of about $2 billion, will be the leading provider of both NOR flash and SRAM, according to Cypress (San Jose, Calif.) and Spansion (Sunnyvale, Calif.). The firm, which will be called Cypress Semiconductor, will be owned roughly 50-50 by shareholders of Cypress and Spansion, the companies said.
Tom Hackenberg, principal analyst for microcontrollers and digital signal processors at IHS Technology, said the proposed merger would bring together two companies with complementary technologies.
In microntrollers, Spansion has been gaining market share more rapidly than Cypress in recent years due to Spansion’s 2013 acquisition of Fujitsu’s microcontroller business and Spansion’s own organic microcontroller design, Hackenberg said. Much of this growth, Hackenburg said, has come from automotive customers. The automotive market is expected to remain a strong market opportunity for years to come, he added.
In 2013, Spansion ranked 10th in microncontroller sales while Cypress ranked twelfth, Hackenburg said. Hackenburg estimates that the combined company would have a total of roughly $750 million in microcontroller sales 2014, ranking ninth overall, ahead of Samsung Electronics Co. Ltd. and about $200 million behind Atmel Corp. Hackenburg added that he expected the combined company to have a strong base with which to position itself in industrial and automotive microcontrollers as well as consumer and, to a lesser degree, telecomm infrastructure.
“It will be interesting to see how their strategy will utilize the combined expertise of SRAM, Hyperflash and configurable programmable SoC expertise in future MCU designs,” Hackenburg said.
"This merger represents the combination of two smart, profitable, passionately entrepreneurial companies that are No. 1 in their respective memory markets and have successfully diversified into embedded processing," said T.J. Rodgers, Cypress's president and CEO, in a statement.
Rodgers added that the company will have opportunities for earnings per share accreditation due to “the synergy in virtually every area of our enterprises."
The companies said the merger is expected to achieve more than $135 million per year in cost synergies. They added that the combined company will continue to pay 11 cents per share in quarterly dividends to stockholders.
"Bringing together these high-performing organizations creates operating efficiencies and economies of scale, and will deliver maximum value for our shareholders, new opportunities for employees and an improved experience for our customers," Kispert said through a statement.
Cypress, founded by Rodgers and other former Advanced Micro Devices (AMD) executives in 1982, has a storied history in the semiconductor industry and provides a number of products, including microcontrollers and embedded memories. Spansion, formerly a joint venture between AMD and Fujitsu, had focused mostly on NOR flash memory, but has diverged into other product areas in recent years, including the 2013 acquisition of Fujitsu’s microcontroller and analog chip business.