In addition, Pericom announced that Proxy Mosaic, a leading independent proxy advisory firm, joined Institutional Shareholder Services ("ISS") and Glass, Lewis & Co. ("Glass Lewis") in recommending that Pericom shareholders vote in favor of the Diodes Merger Agreement.
In recommending that Pericom shareholders vote "FOR" the Diodes Merger Agreement, the Board reiterates the following:
- The increased $17.75 per share purchase price provided by the Diodes transaction represents a substantial premium which is backed by fully committed financing from a U.S. bank.
- After months of negotiations and repeated opportunities to revise its offer, Montage Technology Group Limited ("Montage") has proven unable or unwilling to obtain fully committed financing, instead presenting Pericom with inadequate one-page financing letters that, despite the Company's numerous requests, Montage has failed to make available to Pericom shareholders.
- The Diodes transaction is subject only to Pericom shareholder approval at the Special Meeting and is not subject to any regulatory approval -- shareholders will receive the purchase price promptly following the Special Meeting.
- Despite Montage's misleading statements, a transaction with Montage would be subject to significant regulatory scrutiny, which could delay receipt of the purchase price by several months (if regulators don't enjoin the deal entirely).
- The transaction with Diodes is expected to close within a matter of days, at which point shareholders would be able to immediately reinvest the proceeds of the sale and potentially earn returns instead of waiting for another, less certain transaction to go through a protracted regulatory approval process and possibly never even close.
The letter to shareholders, a copy of which is included below, details further the superior terms of the Diodes transaction, questions Montage's financing commitments and the uncertainty of its offer and highlights the recommendation by ISS, Glass Lewis and Proxy Mosaic that Pericom shareholders vote in favor of the Diodes transaction.
Pericom has mailed a WHITE proxy card to its shareholders in connection with its Special Meeting and urges shareholders to vote "FOR" the Diodes Merger Agreement. Pericom shareholders of record as of the close of business on September 22, 2015 are entitled to vote at the Special Meeting.
The full text of the letter is as follows:
November 16, 2015
As you know, our Special Meeting of Shareholders (the "Special Meeting") will be held Friday, November 20, 2015 at 9:00 a.m. PT. The Special Meeting is being called primarily to seek shareholder approval of the acquisition of Pericom by Diodes Incorporated ("Diodes") (
Your vote on the WHITE proxy card "FOR" the Diodes Merger Agreement is vital to ensuring your prompt receipt of the $17.75 per share cash purchase price offered by the Diodes Merger Agreement. This purchase price represents a 46% premium to the per share closing price of Pericom shares on September 2, 2015, exceeds the five-year trading high in Pericom shares by 8%, and is backed by a rock-solid, fully-funded term loan from a U.S. bank. Subject only to your approval at the Special Meeting, the Diodes transaction offers not only a substantial per share cash premium, but also near-term closing certainty -- the value of which cannot be discounted.
After thoroughly evaluating the Diodes offer independently of and in comparison to the offer Pericom received from Montage Technology Group Limited ("Montage"), in consultation with Pericom's independent financial advisors and independent legal counsel, your Board is fully convinced that your vote on the WHITE proxy card "FOR" the Diodes Merger Agreement is the best -- and likely the only -- way to provide you with the value you deserve.
ISS, GLASS LEWIS AND NOW PROXY MOSAIC, THREE LEADING INDEPENDENT PROXY ADVISORY FIRMS, ALL AGREE WITH YOUR BOARD -- A TRANSACTION WITH DIODES IS FAR SUPERIOR TO THE UNVIABLE AND UNCERTAIN OFFER FROM MONTAGE
We are extremely pleased -- but not surprised -- to inform you that a third independent proxy advisory firm, Proxy Mosaic, joins Institutional Shareholder Services ("ISS") and Glass, Lewis & Co. ("Glass Lewis") in support of your Board's conclusion that a transaction with Diodes is in the best interest of Pericom's shareholders. Sharing the opinion of ISS, Glass Lewis and your Board, Proxy Mosaic concluded that Pericom shareholders vote "FOR" the Diodes Merger Agreement on the WHITE proxy card.
Acknowledging the glaring flaws and significant uncertainty of the Montage offer, Proxy Mosaic noted that:
- "[T]he higher premium carried by the Montage offer should not be taken at face value and instead considered in conjunction with three specific concerns voiced by Pericom's board: first, the disputed regulatory risk associated with the competing bid by Montage; second, the ability of the acquirer to secure robust financing commitments, which could eliminate any potential for a named lender to withdraw a financing once shareholders approved the deal; lastly, a consequence of the previous factors, the time allotted to close the transaction."
Comparing the substantial regulatory, financing and timing risks of Montage's offer to the certainty offered by Diodes' fully-funded credit agreement and Diodes' ability to close quickly without regulatory oversight, Proxy Mosaic, ISS and Glass Lewis each recommended that Pericom shareholders vote in favor of the Diodes Merger Agreement:
- Proxy Mosaic concluded that "[g]iven the modest spread between Diodes bid of $17.75 and Montage's bid of $18.50, we believe that the slight premium does not justify the evident risk inherent in Montage's offer. Based on the foregoing, we recommend voting FOR the [Diodes] merger agreement."
- ISS similarly noted that "[g]iven the apparent heightened risks, shareholders might question whether giving up the certainty of the 'bird-in-the-hand' for an offer that may not ever be consummated with Montage is worth the risk. A vote FOR the Diodes transaction as currently structured is warranted."
- Glass Lewis also concluded that "[u]nless Montage is able to sufficiently meet the financing conditions and address the regulatory concerns that the Company's board has laid out, we believe that the Diodes merger agreement represents the best balance of valuation and deal certainty at this time."
The certainty and substantial value of the Diodes transaction is clearly superior to the Montage offer. Your Board and ISS and Glass Lewis and Proxy Mosaic believe that there is too great a risk to Pericom shareholders that Montage will not be able to close a transaction to acquire Pericom, leaving you with only a reverse break-up fee that is a fraction of the $413 million value of the Diodes transaction.
DO NOT BE MISLED BY MONTAGE! MONTAGE'S OFFER IS NOT VIABLE -- GET THE VALUE YOU DESERVE NOW BY VOTING "FOR" THE DIODES MERGER AGREEMENT!
Although Montage's purported premium of $18.50 per share may seem compelling, your Board knows better and is confident that Pericom's shareholders do too. Montage isn't fooling anybody.
Your Board suspects that Montage has resorted to making misleading claims about its offer precisely because Montage knows that its offer suffers so seriously from financial and regulatory uncertainty that no rational shareholder would consider it on par with -- much less superior to -- the Diodes Merger Agreement.
On the contrary, in addition to a lack of committed financing, the Montage offer is subject to substantial regulatory risks and uncertainties. A transaction with Montage would be subject to regulatory scrutiny and oversight in the U.S., China and Taiwan -- a timely process which would threaten to delay a deal with Montage by several months. Your Board, and three independent proxy advisors, knows this to be reality -- as hard as it may be for Montage to accept -- and therefore can't agree with Montage's latest claim that a transaction with Montage will "provide Pericom shareholders with immediate payment upon closing, the same timing as the Diodes proposal."