CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
1333 New Hampshire Avenue NW, Suite 700 Washington, DC 20036 Telephone: +1 (202) 457-8200 Facsimile: +1 (202) 457-8201 www.calderwoodharkness.com
599 Lexington Avenue, 38th Floor New York, NY 10022 Telephone: +1 (212) 819-7300 Facsimile: +1 (212) 819-7301
December 4, 2023
VIA ELECTRONIC FILING AND INTERNATIONAL COURIER
European Commission Directorate-General for Competition Merger Registry Rue Joseph II 70 B-1000 Brussels, Belgium
Reference: Case M.11247 — Halcyon Semiconductor Aktiengesellschaft / Vectris Photonics, Inc.
Re: Withdrawal of Form CO Notification — Case M.11247 — Halcyon Semiconductor Aktiengesellschaft / Vectris Photonics, Inc.
Dear Members of the Merger Registry:
I. Identification of Counsel and the Notifying Party
I am Howard Bellamy, Specialist Partner in the Antitrust & Competition Practice Group of Calderwood & Harkness LLP, with offices at 1333 New Hampshire Avenue NW, Suite 700, Washington, DC 20036. I write on behalf of our client, Halcyon Semiconductor Aktiengesellschaft ("Halcyon" or "HSAG"), a publicly traded German stock corporation (Aktiengesellschaft) organized and existing under the laws of the Federal Republic of Germany, registered in the commercial register (Handelsregister) of the Munich Local Court (Amtsgericht München) under registration number HRB 178254, with its principal offices located at Halcyon-Platz 1, 81739 München, Germany. Halcyon's ordinary shares are listed and traded on the Frankfurt Stock Exchange (FSE: HSAG), and its American Depositary Receipts are listed and traded on The Nasdaq Stock Market (Nasdaq: HCYN; ISIN US40582R1095). Halcyon's Chief Executive Officer and Chairwoman of the Management Board (Vorstandsvorsitzende) is Dr. Katarina Breuer, and its General Counsel is Dr. Luisa Hartmann.
As the Commission is aware, Halcyon is the notifying party in Case M.11247. Calderwood & Harkness LLP has represented Halcyon throughout these proceedings, and we are duly authorized to submit this correspondence and the formal request contained herein on Halcyon's behalf. We respectfully refer the Commission to the power of attorney previously submitted on file in this matter.
The purpose of this letter is to formally request the withdrawal of the Form CO notification filed by Halcyon in Case M.11247 and the closure of the proceedings, for the reasons set forth in detail below.
II. Background of the Notification
On August 25, 2023, Halcyon filed a Form CO notification with the European Commission pursuant to Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the "EU Merger Regulation" or "EUMR"), and Commission Implementing Regulation (EU) No 1269/2013 of 5 December 2013 (the "Implementing Regulation"), in respect of the proposed acquisition of Vectris Photonics, Inc. ("Vectris"). The notification was duly received by the Commission and assigned Case M.11247.
Vectris is a Delaware C-corporation (Delaware Secretary of State File No. 5918437) headquartered at 4750 Ridgepoint Drive, Suite 300, San Jose, California 95134, United States. Vectris is a fabless designer and supplier of advanced silicon photonics transceivers and co-packaged optics ("CPO") chiplets engineered for hyperscale data center interconnects and next-generation cloud networking architectures. At the time of the notification, Vectris employed approximately 1,450 persons across its operations in the United States, Ireland, Israel, and Germany, and reported fiscal year 2022 revenue of approximately USD 312 million. Vectris is represented by Whitfield, Prager & Loomis LLP, with Catherine Whitfield serving as lead mergers and acquisitions partner and Douglas Prager serving as lead antitrust partner.
The proposed concentration that was the subject of the notification involved the acquisition by Halcyon of sole control of Vectris through an all-cash reverse triangular merger. Under the terms of the transaction, Halcyon Acquisition Sub, Inc., a Delaware corporation (Delaware Secretary of State File No. 7634291) formed solely for the purpose of effectuating the merger, would merge with and into Vectris, with Vectris surviving the merger as a wholly owned subsidiary of Halcyon. The aggregate cash consideration for the acquisition was USD 800,000,000 (eight hundred million United States Dollars), payable to Vectris stockholders upon closing.
The transaction was governed by an Agreement and Plan of Merger, dated as of August 10, 2023 (the "Merger Agreement"), entered into among Halcyon Semiconductor Aktiengesellschaft, Halcyon Acquisition Sub, Inc., and Vectris Photonics, Inc. The Merger Agreement set forth the terms and conditions of the proposed concentration, including, among other things, the representations and warranties of the parties, the conditions precedent to closing, the termination rights, and the regulatory approval requirements. In particular, the consummation of the transaction was conditioned upon, inter alia, the receipt of merger control clearance from the European Commission under the EUMR (the "EC Clearance Condition") and the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), in the United States (the "HSR Condition" and, together with the EC Clearance Condition, the "Antitrust Conditions").
III. Procedural History Before the Commission
Following the filing of the Form CO notification on August 25, 2023, the Commission undertook its initial review of the proposed concentration during the Phase I period. During this period, Halcyon cooperated fully with the Commission's case team, responded to requests for information, and engaged in productive discussions regarding the competitive assessment of the transaction.
On October 6, 2023, the European Commission adopted a decision pursuant to Article 6(1)(c) of the EUMR to initiate proceedings and open a Phase II in-depth investigation into the proposed concentration. The Commission's decision to proceed to Phase II cited serious doubts as to the compatibility of the proposed concentration with the internal market, principally concerning the overlap between Halcyon and Vectris in the design, development, and supply of co-packaged optics chiplets sold to European cloud service providers and hyperscale data center operators. The Commission's preliminary assessment indicated that the combined entity would hold an estimated combined market share of approximately 38% in the supply of CPO chiplets in the European Economic Area ("EEA"), with the transaction resulting in a significant reduction in the number of credible suppliers and a material increase in concentration in a market characterized by high barriers to entry, substantial customer switching costs, and significant ongoing innovation competition.
At the time of this withdrawal notification, the Phase II in-depth investigation was ongoing. No Statement of Objections had been issued by the Commission, and no remedies proposal had been submitted by Halcyon.
IV. Parallel U.S. Antitrust Proceedings
For context, and to provide the Commission with a complete understanding of the circumstances giving rise to this withdrawal request, we briefly summarize the parallel antitrust proceedings in the United States.
On August 18, 2023, Halcyon and Vectris filed their respective premerger notification and report forms under the HSR Act with the Federal Trade Commission ("FTC") and the Antitrust Division of the United States Department of Justice ("DOJ"). On September 15, 2023, the DOJ issued a Second Request (in the form of a Civil Investigative Demand) to both Halcyon and Vectris, thereby extending the HSR Act waiting period and initiating an in-depth investigation into the competitive effects of the proposed transaction in the United States.
On October 30, 2023, the United States Department of Justice filed a civil antitrust complaint seeking to permanently enjoin the proposed transaction in the United States District Court for the District of Columbia, captioned United States of America v. Halcyon Semiconductor Aktiengesellschaft and Vectris Photonics, Inc., Case No. 1:23-cv-03187 (D.D.C.). In its complaint, the DOJ alleged that the proposed acquisition would substantially lessen competition in the market for silicon photonics transceiver modules for hyperscale data center interconnects in the United States, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Specifically, the DOJ alleged that the combined entity would control approximately 47% of the relevant U.S. market (reflecting Halcyon's estimated share of approximately 19% and Vectris's estimated share of approximately 28%), thereby eliminating a significant competitive rival and creating a dominant supplier with the ability and incentive to raise prices, reduce output, slow innovation, and harm competition to the detriment of U.S. hyperscale cloud customers and, ultimately, consumers.
The filing of the DOJ complaint represented a material and significant impediment to the consummation of the proposed concentration and was a principal factor in the parties' subsequent determination, described below, to terminate the Merger Agreement and abandon the transaction.
V. Termination of the Merger Agreement
In light of the regulatory obstacles described above — including the DOJ civil complaint filed to block the transaction in the United States and the opening of the Phase II in-depth investigation by the European Commission — the parties undertook a thorough reassessment of the prospects for obtaining the required antitrust clearances within the timeline contemplated by the Merger Agreement.
The Merger Agreement provided for an Outside Date of March 10, 2024, with one automatic 90-day extension to June 10, 2024 in the event that the antitrust clearances were the sole remaining unsatisfied conditions precedent to closing at the expiration of the initial Outside Date. Notwithstanding this extension mechanism, and after careful deliberation, Halcyon's management and board determined that the Antitrust Conditions could not reasonably be satisfied in a timeframe or on terms that would be acceptable to the parties.
On November 20, 2023, the Supervisory Board (Aufsichtsrat) of Halcyon Semiconductor Aktiengesellschaft, chaired by Prof. Dr. Friedrich Wendt, convened a special session and, after thorough deliberation and upon the recommendation of the Management Board (Vorstand), authorized the Vorstand to exercise the Antitrust Termination Right under the Merger Agreement and to terminate the Merger Agreement in accordance with its terms.
On November 30, 2023, Halcyon delivered a formal Notice of Termination to Vectris Photonics, Inc. (addressed to the attention of Rebecca Lau, General Counsel and Corporate Secretary of Vectris) pursuant to Section 8.1(d) of the Merger Agreement (the "Antitrust Termination Right"). The Notice of Termination stated that the Merger Agreement was being terminated effective immediately based upon the failure to obtain the required antitrust approvals, specifically citing the pending DOJ civil complaint in Case No. 1:23-cv-03187 (D.D.C.) and the ongoing European Commission Phase II investigation in Case M.11247, and the determination by Halcyon that the Antitrust Conditions set forth in Sections 7.1(c) and 7.1(d) of the Merger Agreement could not be satisfied by the Outside Date (including as extended).
Concurrently with the delivery of the Notice of Termination, on November 30, 2023, a Termination Agreement and Mutual Release was duly executed among Halcyon Semiconductor Aktiengesellschaft, Halcyon Acquisition Sub, Inc., and Vectris Photonics, Inc. Pursuant to the terms of that agreement, the parties confirmed the effective termination of the Merger Agreement, agreed to a mutual release of claims arising out of or relating to the Merger Agreement and the proposed transaction (subject to certain customary carve-outs), and confirmed that Halcyon is obligated to pay a reverse break-up fee in the amount of USD 28,000,000 (twenty-eight million United States Dollars), representing 3.5% of the aggregate deal value, to Vectris by no later than December 15, 2023. Halcyon intends to satisfy this payment obligation in full and in a timely manner.
In summary, the Merger Agreement has been terminated, the parties have executed a mutual release, and the proposed concentration that was the subject of Case M.11247 will not be implemented. There is no surviving agreement, arrangement, or understanding between Halcyon and Vectris pursuant to which the transaction could be consummated.
VI. Formal Request to Withdraw the Notification
In light of the foregoing, and given that the Merger Agreement has been terminated and the proposed concentration will not proceed, Halcyon Semiconductor Aktiengesellschaft hereby formally requests, pursuant to Article 6 of the EU Merger Regulation (Council Regulation (EC) No 139/2004) and the applicable provisions of the Commission's Implementing Regulation (Commission Implementing Regulation (EU) No 1269/2013), that the Form CO notification filed on August 25, 2023 in Case M.11247 be withdrawn and that the proceedings in this case be closed.
The basis for this request is straightforward: as a result of the termination of the Merger Agreement, the legal basis and factual predicate for the notification no longer exist. The proposed concentration will not be implemented, and there is no longer any transaction requiring review or clearance by the Commission under the EUMR. Accordingly, continued proceedings in Case M.11247 would serve no purpose.
Halcyon is aware that the Commission has accepted notifications withdrawn in analogous circumstances and has closed proceedings in cases where the underlying transaction has been definitively abandoned. Halcyon respectfully submits that the present case falls squarely within this established practice.
Halcyon respectfully requests that the Commission provide written confirmation at its earliest convenience that (i) the withdrawal of the Form CO notification in Case M.11247 has been accepted, (ii) the proceedings in Case M.11247 have been formally closed, and (iii) the case has been recorded as withdrawn in the Commission's records. We would be grateful if such confirmation could be addressed to the undersigned at the contact information provided below, with a copy to Halcyon's General Counsel, Dr. Luisa Hartmann.
VII. Contact Information for Further Correspondence
Should the Commission require any additional information or documentation in connection with this withdrawal request, or should the Commission's case team wish to discuss any aspect of this matter, please do not hesitate to contact the following persons:
Howard Bellamy Specialist Partner, Antitrust & Competition Calderwood & Harkness LLP 1333 New Hampshire Avenue NW, Suite 700 Washington, DC 20036 United States Telephone: +1 (202) 457-8246
Email: hbellamy@calderwoodharkness.com
Dr. Luisa Hartmann General Counsel (Chefsyndikus) Halcyon Semiconductor Aktiengesellschaft Halcyon-Platz 1 81739 München, Germany Telephone: +49 (89) 7209-4100
Email: l.hartmann@halcyonsemi.de
We remain at the Commission's disposal and are prepared to provide any further assistance that may be required to facilitate the prompt closure of this matter.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Howard Bellamy Specialist Partner, Antitrust & Competition
On behalf of Halcyon Semiconductor Aktiengesellschaft
Enclosures:
1. Copy of the Notice of Termination, dated November 30, 2023, delivered by Halcyon Semiconductor Aktiengesellschaft to Vectris Photonics, Inc. pursuant to Section 8.1(d) of the Agreement and Plan of Merger dated August 10, 2023.
2. Copy of the Termination Agreement and Mutual Release, dated November 30, 2023, executed among Halcyon Semiconductor Aktiengesellschaft, Halcyon Acquisition Sub, Inc., and Vectris Photonics, Inc.
cc:
Dr. Katarina Breuer, Chief Executive Officer and Chairwoman of the Management Board, Halcyon Semiconductor Aktiengesellschaft, München, Germany
Dr. Luisa Hartmann, General Counsel, Halcyon Semiconductor Aktiengesellschaft, München, Germany
Markus Ellinger, Chief Financial Officer, Halcyon Semiconductor Aktiengesellschaft, München, Germany
Oliver Mackenzie, Responsible Partner, Calderwood & Harkness LLP, 599 Lexington Avenue, 38th Floor, New York, NY 10022
Douglas Prager, Partner, Whitfield, Prager & Loomis LLP, Counsel for Vectris Photonics, Inc.