Activists Are Still Fighting Tooth-and-Nail Against These Pending Mergers

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William C. Martin, the manager of Raging Capital, has made good on his promise to fight Mellanox Technologies, Ltd. (NASDAQ:MLNX)’s takeover of EZchip Semiconductor Ltd (NASDAQ:EZCH). Raging Capital recently sent an open letter to fellow shareholders of EZchip Semiconductor urging them to vote against the deal that it believes is severely undervaluing the company. The fund currently holds 1.94 million shares of the Israel-based semiconductor company, which accounts for 6.5% of its common stock.

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The EZchip Semiconductor Ltd (NASDAQ:EZCH) annual shareholder meeting is scheduled for November 12 and the main item on the agenda will be the proposed takeover by Mellanox Technologies. The two companies have reached an agreement for EZchip to be bought for $811 million or $25.50 per share. One of the largest shareholders of the semiconductor company, Raging Capital believes Mellanox’s offer considerably undervalues the company and have slammed the management of EZchip for failing to conduct a proper sale process, instead arranging a “merger of convenience between friends.” They are adamant current terms will see Mellanox as the sole beneficiary of all the upside potential of EZchip and are actually against the company being sold at all. The fund has reiterated its stance as a long-term committed shareholder and believes the company offers “substantial potential upside […] well in excess of the limited risk,” referring to changes in the network processor market that will allow EZchip to strengthen its already dominant position, as well as the new generations of chips the company is preparing for launch.

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In its letter, Raging Capital is making a solid case against the sale of EZchip and is urging shareholders to vote against the deal. Furthermore, the fund has nominated Paul McWilliams and Ken Traub for election as Directors on the company’s Board, stating that a reshaping of the Board of Directors is essential to protect the interests of shareholders. Jim Simons‘ Renaissance Technologies is among those shareholders, with the fund having reported ownership of 277,800 shares as of the end of the second quarter. In general, not many hedge funds are interested in EZchip, as only nine in our database reported long positions in the stock as of the end of the second quarter, with their combined holdings valued at $26 million.

Disclosure: None

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