(November 18, 2010 – Marketwire) — Verigy’s (NASDAQ: VRGY), LTX-Credence (NASDAQ: LTXC) merger proposes to add scale with increased presence in the SOC test market; combine complementary products, markets, customers and channels; and generate annualized synergies of at least $25 million, following the completion of the integration.
Verigy and LTX-Credence Corporation entered into a definitive merger agreement that would create a semiconductor test company with the scale and presence to provide comprehensive solutions to customers across most major semiconductor market segments. The combined company, to be called Verigy, will feature a portfolio of semiconductor test systems to address requirements of the wireless, graphics, computing, automotive, industrial, and entertainment markets.
The new Verigy will have an expanded product portfolio, strong share position in target segments and large support network through a direct support team and key strategic partners such as Spirox in Taiwan and China, the company reports. By combining two of the industry’s most highly skilled and experienced R&D teams under a common focus and direction, Verigy anticipates creating a stronger, more competitive innovator of test cell solutions that enable semiconductor manufacturers to meet time-to-market and cost-of-test demands.
Verigy president and COO, Jorge Titinger, and LTX-Credence president and CEO, David Tacelli, will serve as co-CEOs of the new company, which will be headquartered in Singapore with U.S. headquarters in Cupertino, CA. Verigy chairman and CEO, Keith Barnes, will continue as the chairman of the board of directors, which will comprise 12 members, 7 designated by Verigy and 5 by LTX-Credence. Furthermore, to facilitate the leadership change, Keith Barnes will transition from Verigy CEO to Verigy chairman of the board of directors as of Dec. 31, 2010, and Jorge Titinger will be promoted to Verigy CEO and president.
"Verigy has a well-established presence in the high-performance digital, complex mixed-signal and RF-SOC segments while LTX-Credence has a broad SOC market footprint and expertise in cost-optimized solutions," said Jorge Titinger, Verigy president and COO. "We expect the combination will enable the new Verigy to drive sustainable long-term growth and shareholder value through the expansion of our product and technology portfolio as well as our existing customer relationships."
Under the terms of the agreement, the transaction will either be effected through a reorganization where Verigy and LTX-Credence would be wholly owned subsidiaries of Holdco, a newly created subsidiary, or through a merger where LTX-Credence would become a wholly owned subsidiary of Verigy. LTX-Credence shareholders will receive a fixed exchange ratio of 0.96 shares of Verigy stock or Holdco stock for each share of LTX-Credence stock. Upon closing, Verigy or Holdco, as applicable, will issue approximately 49 million shares on a fully diluted basis to complete the transaction. At that time, Verigy and LTX-Credence shareholders will own approximately 56 percent and 44 percent, respectively, of the combined company.
The Law Office of Jonathan M. Stei, P.L. is investigating the Board of Directors of LTX for possible breaches of fiduciary duty and other violations of state law in connection with their sale price (Source: BUSINESSWIRE). The investigation involves whether the Board of Directors of LTX breached their fiduciary duties to LTX stockholders by failing to adequately shop the Company before agreeing to enter into the transaction and whether LTX has disclosed all material information to shareholders about the proposed transaction. As recently as June 2010, LTX stock traded above $10.00 per share. According to Thompson/First Call, at least one analyst has set a price target of $18.00 per share for LTX-Credence stock. Due to these factors, Kendall Law Group also believes the transaction may be significantly undervaluing the company.
The combined company expects to realize substantial synergies within one year of the close of the deal, with annual cost savings expected to reach at least $25 million, primarily from increased efficiencies in manufacturing and reduced operating expenses.
The transaction is subject to the approval of shareholders from both companies as well as other customary closing conditions and regulatory approvals. The companies expect the transaction to close in the first half of calendar 2011.
Shares of the combined company will trade on the NASDAQ under the symbol "VRGY." Morgan Stanley acted as financial advisor and Wilson Sonsini Goodrich & Rosati acted as legal counsel to Verigy. J.P. Morgan acted as financial advisor and WilmerHale acted as legal counsel to LTX-Credence.
Verigy Odd Lot and Repurchase Program
Verigy also announced today its board of directors has authorized an odd lot program that will result in the purchase of approximately 2.3 million shares, or 4% of Verigy’s current outstanding shares, from shareholders holding less than 100 shares of the combined company following the transaction. This is expected to simplify the combined company’s capital structure. In addition, Verigy’s board has authorized an annual stock repurchase program of up to 10% of the Verigy’s current outstanding shares, effective for approximately 12 months following the transaction. The repurchases are expected to be funded from available cash and short-term investments. The odd lot repurchase and stock repurchase program are both subject to shareholder approval at Verigy’s next shareholder meeting.
Verigy provides advanced semiconductor test systems and solutions used in design validation, characterization, and high-volume manufacturing test. Additional information about Verigy can be found at www.verigy.com.
LTX-Credence is a global provider of ATE solutions designed to deliver value through innovation enabling customers to implement best-in-class test strategies to maximize their profitability. Additional information can be found at www.ltxc.com.
This communication may be deemed to be solicitation material in respect of the proposed transaction between Verigy and LTX-Credence. In connection with the transaction, Verigy and Holdco will file a registration statement on Form S-4 with the SEC containing a joint proxy statement/prospectus. The joint proxy statement/prospectus will be mailed to the shareholders of Verigy and LTX-Credence. Investors and shareholders of Verigy and LTX-Credence are urged to read the registration statement and joint proxy statement/prospectus when it becomes available because it will contain important information about Verigy, Holdco, LTX-Credence and the proposed transaction. The registration statement and joint proxy statement/prospectus (when they become available), and any other documents filed by Verigy, Holdco or LTX-Credence with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Verigy and LTX-Credence by contacting, respectively, Verigy Investor Relations by e-mail at [email protected] or by telephone at 1-408-864-7549 or by contacting LTX-Credence Investor Relations by e-mail at [email protected] or by telephone at 1-781-467-5063. Investors and security holders are urged to read the registration statement, joint proxy statement/prospectus and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction. Verigy, LTX-Credence and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from their shareholders in favor of the proposed transaction. Information about the directors and executive officers of Verigy and LTX-Credence and their respective interests in the proposed transaction will be available in the joint proxy statement/prospectus. Additional information regarding the Verigy directors and executive officers is also included in Verigy’s proxy statement for its 2010 Annual Meeting of Shareholders, which was filed with the SEC on February 23, 2010. As of February 12, 2010, Verigy’s directors and executive officers beneficially owned approximately 1,595,151 shares, or 2.7 percent, of Verigy’s ordinary shares. Additional information regarding the LTX-Credence directors and executive officers is also included in LTX-Credence’s proxy statement for its 2011 Annual Meeting of Stockholders, which was filed with the SEC on November 8, 2010. As of September 30, 2010, LTX-Credence’s directors and executive officers beneficially owned approximately 1,940,204 shares, or 3.9 percent, of LTX-Credence’s common stock. These documents are available free of charge at the SEC’s web site at www.sec.gov and from Verigy and LTX-Credence, respectively, at the e-mail addresses and phone numbers listed above.
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