EZCHIP SEMICONDUCTOR LTD YOKNEAM, Israel, Nov. 5, 2015 /PRNewswire/ -- EZchip Semiconductor Ltd. ("EZchip" or the "Company") (NASDAQ: EZCH), a leader in high-performance processing solutions for carrier and data center networks, today set the record straight regarding the inaccuracies and misrepresentations put forth by Raging Capital, and reiterated the benefit of voting FOR the Merger Proposal with Mellanox Technologies, Ltd. ("Mellanox").
The Annual General Meeting is fast approaching on November 12. The EZchip Board of Directors wants to ensure that shareholders have the correct facts when making significant decisions about the future of their investment in EZchip.
RAGING'S MYTHS THE FACTS
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EZchip's Board failed to run a EZCHIP'S BOARD AND INDEPENDENT FINANCIAL ADVISOR BARCLAYS CONDUCTED A THOROUGH
comprehensive sale process MARKET CHECK to review the semiconductor landscape and ensure the highest
possible valuation for shareholders
Barclays and the EZchip Board identified
eight potential strategic buyers, subsequently narrowing down the list to six in
order to avoid adverse commercial consequences for the Company
Out of the six
companies approached, only two signed NDAs and had telephonic management
meetings. All six potential buyers notified Barclays that they were not
interested in pursuing a transaction with EZchip
Mellanox's cash offer of
$25.50 per share is the result of several price increases following extensive
negotiations
The merger agreement provides clear rights for any other party to
make a proposal to acquire EZchip - no interest has been indicated by any
potential suitor to date
EZchip has not been approached by any potential buyer
willing to pay a higher price than Mellanox
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The EZchip-Mellanox Merger Agreement EZCHIP CEO ELI FRUCHTER AND MELLANOX CEO EYAL WALDMAN ARE NOT FRIENDS. THEY HAVE
is designed to help guarantee a ONLY MET A FEW TIMES OVER THE YEARS AS BUSINESS PROFESSIONALS prior to the May
"Merger of Convenience" between 2015 meeting when Eyal conveyed Mellanox's interest to commence evaluation
friends towards a transaction with EZchip
As EZchip's largest individual shareholder,
Eli has the best interest of shareholders in mind and has voted his shares in
favor of the $25.50 per share cash offer price, which represents:
A 33%
premium and 31% premium over the respective 12-month and 3-month volume weighted
average closing prices;
A 16% premium over the closing price on the day prior
to the transaction announcement; and
Full and fair valuation to EZchip
shareholders with implied multiples that compare favorably to peers and
precedent semiconductor transactions
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A "Go Shop" provision is often standard GO SHOPS ARE NOT FREQUENTLY USED. In the last 10 years in the U.S., only roughly
in a sale process 7% of publicly announced deals have included a "Go Shop" provision(1)
Over the
same period of time, only six out of 87 U.S. public semiconductor deals featured
a "Go Shop" provision, equating to slightly under 7% of transactions and falling
below the overall market average(2)
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Mellanox is poised to capture all of Although there is future potential for EZchip's NPS-400 and Tile-MX product
the upside of EZchip's NPS-400 and lines, headwinds exist. THE BOARD BELIEVES THAT THE CERTAINTY OF THE CURRENT
TILE-MX product lines, without MELLANOX CASH OFFER OUTWEIGHS UNCERTAIN FUTURE REWARDS:
Potential revenue
rewarding shareholders streams from unproven products always carry risk and expectations may not
realize;
The Mellanox transaction recognizes the value of NPS-400 and TILE-MX
and takes into account the decline in market value for legacy NPU products
following Cisco's decision to go in-house for development;
The semiconductor
industry is a highly competitive market where scale will be a deciding factor
between winners and losers; and
The proposed transaction compensates
shareholders for synergies, while eliminating execution risks for EZchip
continuing on a stand-alone basis
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EZchip has a very attractive risk/ EZCHIP FACES HEADWINDS CONTINUING ON A STAND-ALONE BASIS:
EZchip has become
reward set-up with limited downside the clear leader in network processors (NPU), but NPUs represent a small
risk and significant upside potential addressable market ($367 million market in 2014)(3) in which the largest target
routing customers are moving to develop NPUs in house:
Juniper in 2009
(EZchip's largest customer at such time), Huawei in 2012 and most recently Cisco
in 2015 (~35% EZchip revenue in 1H 2015) decided to go in-house for NPU
functionality
History with Juniper suggests winning Cisco back will be very
difficult due to its software investments around in-house ASIC
With Alcatel-
Lucent that always developed NPUs in house, these are the four largest routing
vendors and EZchip's largest potential customers
EZchip's next generation NPS
leapfrogs the competition, but must win high volume white box router designs in
data centers to offset the loss of the traditional routing vendors:
With its
NPS product line, EZchip has won three tier-1 data center customers; however,
it is not clear what revenue these design wins will translate to or when
It is
possible that by the time NPS-400 reaches volume production (currently
projected in 2017) there will be other third party chips that are not NPUs, but
will provide simpler and lower cost routing solutions for the vast majority of
white boxes, which could significantly reduce the addressable market for the
NPS-400
The Tilera acquisition enabled EZchip to enter the multi-core space
and expand its addressable market (~$1.3 billion estimate for 2017)4, but in
contrast to the NPU market, where EZchip was able to create a niche for itself,
the multi-core space is crowded with well-capitalized, large scale competitors
(including Avago/Broadcom, Intel/Altera, NXP/Freescale), and EZchip's next
generation multi-core CPU is not expected to be in production until 2018
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The EZchip-Mellanox transaction RAGING'S ASSERTION THAT THE MELLANOX TERMINATION FEE REPRESENTS 4.9% OF THE
provides for an abnormally high EQUITY VALUE OF THE TRANSACTION IS FACTUALLY INCORRECT and purposefully distorts
termination fee, preventing potential the details of the Merger Proposal in order to bias shareholder opinions
suitors from making an offer regarding the overwhelming benefits that the transaction provides them
In the
event that EZchip accepts a higher bid, the expense associated with terminating
the transaction with Mellanox is $28.4 million, or 3.5% of the $811 million
equity value
This is consistent with the standard break-up fee for public
company transactions of comparable size, as Raging stated in its letter
EZCHIP
HAS NOT BEEN APPROACHED BY ANY OTHER POTENTIAL BUYER willing to pay a higher
price for the Company
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In evaluating the facts associated with the Merger Proposal, EZchip continues to urge shareholders to follow the recommendations of leading proxy advisory firms ISS and Entropy and vote FOR the transaction with Mellanox and FOR ALL of the Company's experienced director nominees, and AGAINST Raging Capital's two director nominees. Additional information related to EZchip setting the record straight can be found in an infographic recently mailed to EZchip shareholders and posted on the Company's website.
IMPORTANT
The Annual General Meeting is fast approaching. If you are a shareholder, it is important that the Company promptly receives your vote. If you have NOT already voted, please IMMEDIATELY vote FOR the Merger Proposal, FOR ALL of EZchip's experienced director nominees and AGAINST Raging Capital's two director nominees to ensure that your vote will be received in time. Please do not return or otherwise vote any GOLD proxy card sent to you by Raging Capital. Even if you have previously voted against the merger or for Raging Capital's nominees, you have every right to change your vote. Only your latest dated, validly executed vote will count.
If you have any questions about the Annual General Meeting or need assistance in voting your shares, please contact the Company's proxy solicitor, MacKenzie Partners, at Toll-free: (800) 322-2885 or Collect: (212) 929-5500.
About EZchip
EZchip is a fabless semiconductor company that provides high-performance processing solutions for a wide range of applications for the carrier, cloud and data center networks. EZchip's broad portfolio of solutions scales from a few to hundreds of Gigabits-per-second, and includes network processors, multi-core processors, intelligent network adapters, high-performance appliances and a comprehensive software ecosystem. EZchip's processing solutions excel at providing great flexibility and high performance coupled with superior integration and power efficiency.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that are not historical facts and may include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance and the consummation of the merger with Mellanox Technologies, Ltd. These statements are only predictions based on EZchip's current expectations and projections about future events based on its current knowledge. There are important factors that could cause EZchip's actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Those factors include, but are not limited to, the impact of general economic conditions, competitive products (including in-house customer developed products), product demand and market acceptance risks, customer order cancellations, reliance on key strategic alliances, fluctuations in operating results, delays in development of highly-complex products and other factors indicated in EZchip's filings with the Securities and Exchange Commission (SEC). For more details, refer to EZchip's SEC filings and the amendments thereto, including its Annual Report on Form 20-F filed on March 31, 2015 and its Current Reports on Form 6-K (including EZchip's Proxy Statement, dated October 13, 2015 (as supplemented on October 26, 2015)). EZchip undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in our expectations, except as may be required by law.
Important Additional Information
This communication is neither an offer to purchase nor a solicitation of an offer to sell securities. Shareholders are urged to read the Proxy Statement, dated October 13, 2015 (as supplemented on October 26, 2015), together with the Merger Agreement and other exhibits thereto, in their entirety because they contain important information. The Proxy Statement, dated October 13, 2015 (including the Merger Agreement with Mellanox Technologies, Ltd. and the fairness opinion received by the EZchip Board), has been filed by EZchip with the SEC and mailed to shareholders. The Supplement to the Proxy Statement, dated October 26, 2015, has been filed by EZchip with the SEC and is being mailed to shareholders. Shareholders may also obtain a free copy of these statements and other documents filed by EZchip with the SEC at the website maintained by the SEC at www.sec.gov by directing such requests to:
MacKenzie Partners, Inc.
Toll-free: (800) 322-2885
Collect: (212) 929-5500
Contacts
EZchip Investor Contact
Jeffrey A Schreiner
EZchip
+1-408-520-3676
jschreiner@ezchip.com
EZchip PR Contact
Daureen Green
EZchip
+972-4-959-6677
dgreen@ezchip.com
Additional Contacts
Joele Frank, Wilkinson Brimmer Katcher
Eric Brielmann / Kate Beers
415-869-3950
Sharon Stern / Adam Pollack
212-355-4449
MacKenzie Partners, Inc.
Bob Marese
212-929-5405
(1) Factset MergerMetrics.
(2) Factset MergerMetrics.
(3) The Linley Group.
(4) The Linley Group
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SOURCE EZchip Semiconductor Ltd.
