Contemplated Transaction
As the lead participant, Microchip would acquire Atmel in a cash merger (subject to Atmel’s potential desire for some common stock). The transaction would be financed with a combination of cash from Microchip and proceeds from the sale of certain Atmel assets to ON Semiconductor. With respect to the latter, ON Semiconductor would acquire the assets related to Atmel’s nonvolatile memory and RF and automotive businesses immediately prior to the merger closing. ON Semiconductor would finance its purchase using a combination of existing cash resources, borrowings under its existing credit facility and additional financing.
Although not a condition to our offer, Microchip intends to dispose of Atmel’s ASIC business upon completing the acquisition or shortly thereafter. Microchip is confident that it could divest the business and has engaged recently in discussions with a third party who has expressed interest in acquiring it.
Compelling Business Rationale that will Benefit Customers and Business Partners
It is clear that your businesses would thrive inside Microchip and ON Semiconductor. Microchip is a leading provider of microcontrollers and analog semiconductors, having posted industry-leading financial results and superior shareholder returns. Microchip has a proven reputation for providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide spanning the automotive, communications, computing, consumer and industrial control markets. And ON Semiconductor is a leader in analog and mixed signal technology and design, with a focus on driving shareholder returns through strong margins and superior cash flow. ON Semiconductor is well-positioned as a preferred supplier of efficient power solutions to customers in the power supply, automotive, communication, computer, digital and consumer, medial, industrial and military/aerospace markets, with recognized excellence in sales and marketing, supply chain management and world class, high volume, cost effective manufacturing.
Your customers and business partners will benefit from a more complete, robust and competitive product offering from a combined company that is better positioned to deliver high-quality design components immediately as well as technology road maps and innovative solutions to help them stay ahead of tomorrow’s design trends.
Attractive Opportunity for Atmel’s Talented Employee Base
We also believe the transaction we are proposing represents a uniquely attractive opportunity for Atmel’s employees to join with companies better able to respond to marketplace challenges and compete successfully over the long-term. We have the highest respect for the quality of Atmel’s work-force and its culture of innovation. A significant portion of the transaction value is represented by the talented employees that would continue to work for our companies going forward. We are therefore ready to discuss with you the best way to structure incentives to retain and motivate your key talent following the transaction.
Prepared to Engage in Meaningful Discussions Promptly
We have dedicated significant time and resources in evaluating the merits and risks of this transaction and are confident that it can be consummated expeditiously in partnership with your team. We have reviewed the transaction with our respective counsel and are confident that the transaction will receive all necessary regulatory approvals. Although we have completed extensive due diligence based on publicly available information, our proposal is of course subject to customary due diligence, as well as the negotiation of definitive transaction agreements (including with respect to ON Semiconductor’s additional financing) and the satisfaction of customary conditions to be set forth in such agreements. We have retained J.P. Morgan to act as our financial advisor and Simpson Thacher & Bartlett LLP and DLA Piper as legal advisors. We and our advisors are available to meet with you immediately to discuss the terms of our proposal and to commence due diligence and the negotiation of definitive documentation for the transaction.
We believe now is the right time to pursue the transaction, and we are committed to moving forward on an expedited basis. Considering the substantial premium and other compelling benefits of this proposal, we are confident that, given the opportunity, Atmel’s stockholders and your other stakeholders will enthusiastically support this offer. In light of the foregoing, we ask that you engage us in a meaningful and productive discussion about this proposal promptly and with a sense of urgency. We remain available to meet with you further to continue to discuss the value creation opportunity that the potential transaction represents. We look forward to your prompt response.
Sincerely,
| Steven Sanghi | Keith Jackson | |
| President, Chief Executive Officer and | President and Chief Executive Officer | |
| Chairman of the Board | ON Semiconductor Corporation | |
| Microchip Technology Incorporated |
