Friday, December 29, 2006

Chapman Capital Urges Cypress Semi (CY) to Split-Off SunPower (SPWR) Look at LBO of Core Business

Activist hedge fund Chapman Capital sent a letter to the board of Cypress Semiconductor (NYSE: CY) recommending the company reorganize via a split-off of its controlling stake in SunPower (Nasdaq: SPWR) and subsequent going-private LBO transaction of the core semiconductor business.

Chapman Capital said they own 1.5 million shares, or just over 1% of the Cypress stock.

Chapman said it is their understanding that this past fall, the company engaged Credit Suisse to represent Cypress in LBO discussions that valued Cypress Core at $1.8-$2 billion. The firm said based on the core value and including the SunPower stake the stock should be worth $22 per share, which compares to the current market price of around $16. Chapman said taking into account Cypress' existing cash balances, one could argue that Cypress core now trades at nearly the same value as when it was taken public twenty years ago.

Chapman said "given the salubrious environment for private equity capital and relatively healthy stake of the Cypress Core business, there is a strong argument to be made that striking while the iron is hot is readily applicable to a Cypress Core LBO."

Chapman said they are "investors and not speculators associated with Cypress", indicating they are in for the long-term.

Chapman also said they plan to hold founder T. J. Rodgers to his promise that "you and I are going to make as much money as fast as we can on this."


The letter is very long, but you can read the full letter here: Chapman Capital Recommends Reorganization of Cypress Semiconductor Corporation

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