Raging Capital Pens Letter to EZchip Board, Opposes Merger's Valuation

Oct 22 2015 | 10:21pm ET

New Jersey-based hedge fund Raging Capital Management has strongly urged investors in EZchip Semiconductor Ltd. vote against a proposed takeover, according to an open letter released Thursday. 

Raging Capital, which owns approximately 6.5% of the Israeli technology company’s shares and is its sixth-largest investor, argues that the $25.50 per share offer from rival Mellanox Technologies fails to adequately value EZChip, and that the company’s board has failed to maximize value through a rigorous sale process.

In the letter, Raging Capital also put forth two nominees for EZChip’s board, saying its concerns about the potential Mellanox acquisition were significant enough for it to seek board representation in order to protect the interests of all shareholders. 

"We believe EZchip is a fast growing, market leader in an expanding multi-billion dollar market with a strong balance sheet and long-life product portfolio," said William Martin, chairman and CIO of Raging Capital, in the letter. “EZchip has enormous potential to grow as an independent public company and should not be sold at this time.”

“However, if the company should be sold, we believe the board has an obligation to conduct a thorough process designed to maximize shareholder value; it is apparent that this has not taken place,” Martin continued. “

“In our opinion, the Board failed to conduct a robust and rigorous process to sell the company. As a result, shareholders are being asked to approve an acquisition in which the transaction price is significantly below what the company is actually worth,” says the letter, citing the recent exits of competitors Marvell Technologies and Broadcom from the network processor market industry. 

The company’s annual meeting, at which shareholders will vote on the proposed deal and director nominees, is scheduled for November 12.

Headquartered near Princeton, NJ, Raging Capital was founded in 2006 by Martin, who started Ragingbull.com in 1997 as one of the first financial websites and sold it in 1999 for more than $160 million. The firm manages more than $900 million in mostly long/short equity strategies.

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