Microsemi to acquire Vitesse Semiconductor

Microsemi, a provider of semiconductor solutions differentiated by power, security, reliability and performance, and Vitesse Semiconductor Corporation, jointly announced that Microsemi has entered into a definitive agreement to acquire Vitesse for $5.28 per share through a cash tender offer, representing a premium of 32 percent based on the average closing price of Vitesse’s shares of common stock during the 30 trading days ended March 17th, 2015. The board of directors of Vitesse unanimously recommends that Vitesse’s stockholders tender their shares in the tender offer. The total transaction value is approximately $389m.

Headquartered in Camarillo, California, Vitesse designs a diverse portfolio of high-performance semiconductors, application software, and integrated turnkey systems solutions for carrier, enterprise and Internet of Things (IoT) networks worldwide. Vitesse’s products enable the fastest-growing network infrastructure markets including mobile access/IP edge, enterprise cloud access, and industrial-IoT networking.

“This acquisition is further evidence of Microsemi’s continuing commitment to grow as a communications semiconductor company,” stated James J. Peterson, Microsemi chairman and CEO. “Vitesse’s highly complementary technology suite will expand our product offering and accelerate growth with differentiated technology in emerging markets, while benefitting from the increased scale, consolidated infrastructure and cost savings of the combined entity.”

“The proposed acquisition of Vitesse by Microsemi will create a powerful combination,” said Chris Gardner, Vitesse’s chief executive officer. “I believe Microsemi will be able to leverage Vitesse’s Ethernet technology and capabilities further into the communications market and has the scale to implement the adoption of our industrial IoT strategy.”

Microsemi expects significant synergies from this transaction and expects to see immediate accretion in the first full quarter of completion. Based on current assumptions, Microsemi expects the acquisition to be $0.16 to $0.20 per share accretive in its first full fiscal year ending September 30, 2016.

As of this date, Microsemi remains comfortable with its Jan. 22nd, 2015 non-GAAP guidance for its second fiscal quarter of 2015, ending March 29th, 2015. Microsemi currently intends to announce it second fiscal quarter results on April 23rd, 2015. Further details will be forthcoming.

Tender Offer and Closing

Under the terms of the definitive acquisition agreement, Microsemi will commence a cash tender offer to acquire Vitesse’s outstanding shares of common stock at $5.28 per share, net to each holder in cash. Upon satisfaction of the conditions to the tender offer and after such time as all shares tendered in the tender offer are accepted for payment, the agreement provides for the parties to effect, as promptly as practicable, a merger which would result in all shares not tendered in the tender offer being converted into the right to receive $5.28 per share in cash. The tender offer is subject to customary conditions, including the tender of at least a majority of the outstanding shares of Vitesse’s common stock on a modified fully diluted basis and certain regulatory approvals, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and is expected to close in Microsemi’s fiscal third quarter, ending June 28th, 2015. No approval of the stockholders of Microsemi is required in connection with the proposed transaction. Terms of the agreement were unanimously approved by the boards of directors of both Microsemi and Vitesse. Microsemi has received support agreements from Vitesse stockholders holding approximately 22% of Vitesse’s outstanding common shares. Under the terms of the support agreements, these stockholders have agreed to tender their shares in the tender offer.

Under the terms of the merger agreement, Vitesse may solicit superior proposals from third parties for a “go shop” period of 21 calendar days continuing through April 7th, 2015. It is not anticipated that any developments will be disclosed with regard to this process unless and until Vitesse’s board of directors makes a decision to pursue a potential superior proposal. Deutsche Bank will assist Vitesse with its go shop process. There are no guarantees that this process will result in a superior proposal. The merger agreement provides Microsemi with a customary right to match a superior proposal. The agreement also provides for certain break-up fees payable to Microsemi in connection with the termination of the agreement in certain circumstances.

BofA Merrill Lynch is providing the financing for the acquisition.  BofA Merrill Lynch and RBC Capital Markets acted as financial advisors, and O’Melveny & Myers LLP is acting as legal adviser to Microsemi. Deutsche Bank and Needham & Company are acting as financial advisors and Stubbs Alderton & Markiles, LLP is acting as legal advisor to Vitesse.

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