- The increased $17.75 purchase price offered by Diodes provides shareholders with a substantial premium backed with clear, near-term closing certainty.
- The Diodes transaction is subject only to Pericom shareholder approval at the Company's Special Meeting of Shareholders (the "Special Meeting"), which is scheduled to be held on November 20, 2015.
- The offer from Montage Technology Group Limited ("Montage") has been unanimously rejected by Pericom's Board of Directors based on its substantial risk of failing to close.
- After months of negotiations and repeated opportunities to revise its offer, Montage is still unable or unwilling to obtain truly committed financing.
- The two leading independent proxy advisory firms, Institutional Shareholder Services ("ISS") and Glass, Lewis & Co. ("Glass Lewis"), recommend shareholders vote "FOR" the acquisition by Diodes.
The letter to shareholders, a copy of which is included below, details the superior terms of the Diodes transaction, questions Montage's financing commitments and highlights the recommendation by ISS and Glass Lewis 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 proposed Diodes acquisition. Pericom shareholders of record as of the close of business on September 22, 2015 are entitled to vote at the Special Meeting.
November 12, 2015
Dear Shareholders,
Your vote at Pericom's upcoming Special Meeting of Shareholders (the "Special Meeting") in support of the proposed acquisition by Diodes is critical to lock in the substantial and increased cash premium represented by the $17.75 per share purchase price offered by Diodes Incorporated ("Diodes"). At the Special Meeting on November 20, 2015, the Pericom Board of Directors strongly recommends that you vote on the WHITE proxy card "FOR" the Agreement and Plan of Merger between Diodes and Pericom, dated September 2, 2015, as amended November 5, 2015 (the "Diodes Merger Agreement").
In making such recommendation, the Pericom Board of Directors notes the following:
- The increased $17.75 purchase price provided by the Diodes transaction represents a substantial premium backed by near-term closing certainty.
- The Diodes' transaction is far superior to the offer from Montage Technology Group Limited ("Montage"), which suffers from a glaring lack of committed financing and is subject to substantial risks and uncertainties.
- Leading independent proxy advisory firms Institutional Shareholder Services ("ISS") and Glass, Lewis & Co. ("Glass Lewis") agree with your Board:
- ISS noted, "A vote FOR the Diodes transaction as currently structured is warranted" and "[g]iven the apparent heightened risks [of the Montage offer], shareholders might question whether giving up the certainty of the 'bird-in-the-hand' for an offer that may never be consummated with Montage is worth the risk."
- Similarly, Glass Lewis stated, "Approve the Diodes merger agreement, which, as currently outlined, offers...arguably much greater closing certainty than the Montage Proposal."
- ISS noted, "A vote FOR the Diodes transaction as currently structured is warranted" and "[g]iven the apparent heightened risks [of the Montage offer], shareholders might question whether giving up the certainty of the 'bird-in-the-hand' for an offer that may never be consummated with Montage is worth the risk."
THE SUBSTANTIAL PREMIUM AND CLOSING CERTAINTY ASSOCIATED WITH THE DIODES TRANSACTION MAKE IT FAR SUPERIOR TO THE UNVIABLE AND UNCERTAIN OFFER FROM MONTAGE TECHNOLOGY GROUP
The Diodes merger, which your Board has unanimously approved after thorough evaluation in consultation with its independent financial advisors and outside legal counsel, represents a substantial premium to Pericom shareholders and a $13 million increase from Diodes' previous attractive offer. It also continues to offer near-term closing certainty. At $17.75 per share in cash, the purchase price offered by the Diodes transaction represents a 46% premium to the per share closing price of Pericom shares on September 2, 2015, and exceeds the five-year trading high in Pericom shares by 8%.
The Diodes Merger Agreement continues to be backed by a fully-funded credit agreement and term loan from Bank of America, and the transaction is not subject to any regulatory approvals. Subject only to your approval at the upcoming Special Meeting, this straightforward transaction is expected to close promptly following the Special Meeting in the fourth quarter of 2015.
In reaching its unanimous determination that a transaction with Diodes is in the best interests of Pericom shareholders, your Board weighed the substantial premium and high likelihood of a prompt closing offered by the Diodes transaction both independently of and in comparison to the offer from Montage.
As we have previously stated, we have a duty to obtain the highest value reasonably available to our shareholders. The Pericom Board took into serious consideration the additional premium ostensibly offered by Montage as compared to the premium offered by Diodes. However, we could not overlook our many serious concerns with the fundamental risks associated with Montage's offer, including:
- risks and uncertainties regarding Montage's ability (or unwillingness) to obtain fully committed financing and the regulatory approvals required for an acquisition of Pericom by Montage;
- Montage's inability to ultimately close a transaction with Pericom in a timely fashion, if at all; and
- Montage's erosion of your Board's trust through continued misrepresentations throughout the sales process and then to Pericom shareholders via multiple misleading communications.
These factors made our conclusion crystal clear: we recommend that you, our shareholders, vote in favor of the far superior Diodes transaction. We also note that the Pericom Board and senior management team collectively own more than 10% of Pericom's outstanding shares, and our interests in achieving the best possible outcome are fully aligned with your interests.
MONTAGE WON'T (OR SIMPLY CAN'T) ASSEMBLE A VIABLE OFFER
The supposed premium of the Montage offer is enticing on its face, but it should not obfuscate and distort the reality -- Montage has been unwilling (or unable) to secure real, committed financing that would enable it to make a viable offer, even after months of negotiations and repeated opportunities to do so.
To date, Montage has failed to demonstrate that it can actually pay Pericom shareholders the premium contemplated by its offer. Based on current financing commitments -- or lack thereof -- your Board believes there is a substantial risk that Pericom shareholders may never receive the $18.50 per share as contemplated by the Montage offer. It simply doesn't matter what premium Montage purportedly offers if they don't ultimately have the funds to deliver such premium to Pericom shareholders. Montage has given no reasonable or reliable assurances that it has or will ever have such funds.
We believe Montage is consistently misrepresenting its one-page financing letters from Bank of China Shanghai Pudong Branch and China Electronics Financial Co Ltd. as "fully committed financing," when, in fact, such letters are subject to broad and vague conditions, making any "commitment" thereunder effectively meaningless. For example, contrary to Montage's misleading statements to Pericom shareholders that its one-page financing letter from Bank of China Shanghai Pudong Branch represents "committed financing with essentially only a 'Material Adverse Effect' out," such letter actually explicitly provides that "the loan needs to be evaluated by our committee and will not be issued until all the conditions that our bank requires and admits are fully satisfied." Despite repeated requests, Montage has failed to provide any further information regarding what such conditions may be (other than the misleading statement to Pericom shareholders that this is only a "Material Adverse Effect" condition -- which it clearly is not). Despite our repeated requests, Montage has also failed to make the one-page financing letters available to Pericom shareholders.
Furthermore, it is difficult for your Board to ignore Montage's misguided attempts to obscure the regulatory scrutiny a Montage-Pericom transaction would face in multiple countries . For example, Montage has unequivocally stated in its communications to Pericom shareholders that "Montage is assuming ALL regulatory risk and its offer has NO regulatory conditions." Contrary to Montage's misleading statements, Montage's proposed merger agreement includes an explicit closing condition that provides Montage with the absolute right to walk away from the transaction and refuse to close if any one of numerous governmental entities (including, among others, the Committee on Foreign Investment in the United States (CFIUS) and government entities in Taiwan or China) enacts or issues an order making illegal or permanently enjoining the transaction. Despite Montage's claims that it can make key regulatory approvals magically disappear, the truth is that Montage cannot contract away the oversight or authority of governmental regulators. To suggest such an action demonstrates a desperate move to hide the facts from Pericom shareholders.
