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Spansion Inc., Cypress Semiconductor Shares Surge on Merger Deal

The shares of Spansion Inc. (NYSE:CODE) and Cypress Semiconductor Corporation (NASDAQ:CY) surged after announcing a merger agreement today.

Spansion Inc., Cypress Semiconductor Shares Surge on Merger Deal

The stock price of Spansion Inc. (NYSE:CODE) climbed more than 25% to $28.61 per share while Cypress Semiconductor Corporation (NASDAQ:CY) went up nearly 18% to $12.23 per share at the time of this writing, around 11:33 A.M. in New York.

Spansion-Cypress merger details

Spansion Inc. (NYSE:CODE) and Cypress Semiconductor Corporation (NASDAQ:CY) signed a $4 billion all-stock, tax free merger transaction.  The merger will create a leading global provider of microcontrollers and specialized memories for embedded systems.

Under the terms of the agreement, the shareholders of Spansion Inc. (NYSE:CODE) will receive 2.457 shares of Cypress Semiconductor Corporation (NASDAQ:CY) for every Spansion share they own. The shareholders of each company will own approximately 50% after the merger.

The combined company is expected to generate more than $2 billion in annual revenue and more than $235 million in cost synergies on an annualized basis within three years. The merger is also expected to accretive to non-GAAP earnings with the first full-year following the closing of the transaction, according to both companies.

The combined company will continue to pay a quarterly dividend of $0.11 per share to shareholders.

Executive comments

T.J. Rodgers, president and CEO of Cypress Semiconductor Corporation (NASDAQ:CY) said, “This merger represents the combination of two smart, profitable, passionately entrepreneurial companies that are No. 1 in their respective memory markets and have successfully diversified into embedded processing.”

On the other hand, John Kispert, CEO of Spansion Inc. (NYSE:CODE) said, “Bringing together these high-performing organizations creates operating efficiencies and economies of scale, and will deliver maximum value for our shareholders, new opportunities for employees and an improved experience for our customers.”

He added that the combined company is well-positioned to deliver best-of-breed solutions and execute on their long-term vision of adding value through embedded system-on-chip solutions given its incomparable expertise and global reach and market-leading products.

The board of the combined company will be composed of eight directors—four directors from Cypress Semiconductor Corporation (NASDAQ:CY) including T.J. Rodgers and Eric Benhamou and four directors from Spansion Inc. (NYSE:CODE) including John Kispert and Ray Bingham.

The transaction is subject to customary closing conditions, regulatory approvals in China, Germany and the United States and approvals of the shareholders of Cypress Semiconductor Corporation (NASDAQ:CY) and Spansion Inc (NYSE:CODE). Both companies expect to close the deal in the first half of 2015.