June 8, 2015 / 11:42 AM / 5 years ago

Integrated Silicon, Cypress Semi deal falls apart

(Reuters) - Chipmakers Integrated Silicon Solution Inc ISSI.O and Cypress Semiconductor Corp (CY.O) have failed to reach a merger agreement due to potential antitrust concerns.

Cypress Semi raised its offer to buy Integrated Solution for a second time in May to $643 million, trumping bids by a Chinese consortium led by Summitview Capital.

Integrated Silicon said Cypress Semiconductor was not willing to take “necessary” actions to ensure antitrust clearance in the United States and Germany, countries where both have a significant share of the SRAM memory chip market.

SRAM (static random access memory) chips are more expensive than DRAM chips, which are mostly used in PCs, but are faster and require lesser power. SRAM chips are used in a variety of industries including automotive electronics, appliances and toys.

Cypress said the combined entity would have an 80 percent share of the SRAM market in the United States and would be the only supplier of these chips to the automotive industry.

The combined company would also exceed 70 percent of the total market share in Germany, becoming the sole supplier to German carmakers.

In the United States, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have 30 days to review a filing and to issue the a subpoena seeking more information, a process also known as “second request”.

Integrated Silicon said a second request investigation was likely and could cost each company more than $3 million, take up to nine months to complete and result in the divestiture of a portion of their SRAM business.

The company said Cypress had downplayed antitrust risks saying the SRAM market was moving to embedded from standalone chips and since the companies were not major suppliers of embedded chips, the deal would not present any antitrust risk.

Integrated Silicon said it asked Cypress to take “all necessary actions” to comply with antitrust rulings, but Cypress only agreed for “all reasonable actions”.

Integrated Silicon said if Cypress agreed to provide protection against antitrust risk, it would finalize an agreement in the weekend.

Shares of the companies were untraded before the bell on Monday.

Reporting by Kshitiz Goliya in Bengaluru; Editing by Don Sebastian and Saumyadeb Chakrabarty

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