The sale of Silicon Valley semiconductor maker Integrated Silicon Solution Inc. to a Chinese investment consortium for about $765 million was approved Monday by ISSI's shareholders.

The action ends a two-month battle over the company that began when Cypress Semiconductor, another valley chip company, complained that it had been excluded from the sale process and began bidding against the Chinese consortium, Uphill Investment.

Uphill is an investment vehicle created for the deal by China-based Summitview Capital, eTown MemTek, Huaqing Jiye Investment Management and an investment fund run by Hua Capital Management.

Last year, China announced a plan to become more self-sufficient in semiconductor design and manufacture by 2020 through investment, research and acquisition.

Another valley company, Omnivision, is being acquired by a separate Chinese investment group.

The increasingly bitter bidding war for ISSI ended last week when Cypress made a final offier that was 40 cents a share lower than Uphill's $23 a share, but which Cypress argued was superior because of potential synergies and issues facing an acquisition by Uphill.

An activist hedge fund, Starboard Value, became a major ISSI shareholder last year and began pushing for a sale.

All the pieces were in place in March for Uphill to acquire Milpitas-based ISSI for $19.25 a share, or about $639 million. Then Cypress CEO T.J. Rodgers complained that he hadn't been asked to bid. That sparked outrage from Starboard, which said it was "extremely disconcerted" that Cypress hadn't been contacted

Beginning in May, San Jose-based Cypress offers and counteroffers forced Uphill to raise its bid by nearly 20 percent.

ISSI said it expects to close the deal by the third quarter of this year, after restructuring its operations in Taiwan and obtaining the approval of the Committee on Foreign Investment in the United States.

Cypress had argued in making its offer that Uphill would face rough sledding before the committee, a secretive multi-agency group that reviews foreign acquisitions of U.S. technology.

Rodgers said in a letter last week that if the deal with Uphill fails to win regulatory approval, he may come back with a lower offer.

In making his final offer, Rodgers acknowledged that he couldn't top Uphill, "with its backing from the Chinese government."

The sale prompted a letter from Rep. Dana Rohrabacher, R-Huntington Beach, to Treasury Secretary Jack Lew, warning that Chinese acquisitions had the potential of "gutting" U.S. semiconductor capability.

"The underlying objective of these Chinese entities," Rohrabacher said, "has been to acquire important technology developed by U.S. companies, transport intellectual property and capabilities to China, and then deploy these capabilities for primarily domestic use."

ISSI is a relatively small part of the U.S chip industry, specializing in a type of memory chip that it sells to automotive industry and other industrial customers. It is "fabless," meaning that it does not operate its own foundry, but outsources the work.

By: DocMemory
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