PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT — DRAFT FOR INTERNAL REVIEW AND CLIENT APPROVAL
CASE M.11247 — HALCYON SEMICONDUCTOR / VECTRIS PHOTONICS
Draft Form CO Notification (Selected Sections)
Prepared by: Calderwood & Harkness LLP Antitrust & Competition Practice
Principal Author: Howard Bellamy Specialist Partner, Antitrust & Competition
Supporting Team: Oliver Mackenzie, Responsible Partner, M&A Derek Okonkwo, Lead Associate, M&A Tiffany Rosenthal, Working Associate, M&A
Calderwood & Harkness LLP 1333 New Hampshire Avenue NW, Suite 700 Washington, DC 20036 (Antitrust & Competition Office)
599 Lexington Avenue, 38th Floor New York, NY 10022 (M&A Office)
Date of Draft: August 22, 2023 Intended Filing Date: August 25, 2023 Engagement Number: 1032-00005
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT — DRAFT FOR INTERNAL REVIEW AND CLIENT APPROVAL
TRANSMITTAL MEMORANDUM
FROM: Howard Bellamy, Specialist Partner, Antitrust & Competition, Calderwood & Harkness LLP
TO: Dr. Luisa Hartmann, General Counsel, Halcyon Semiconductor AG Dr. Katarina Breuer, Chief Executive Officer, Halcyon Semiconductor AG
CC: Oliver Mackenzie, Responsible Partner, M&A, Calderwood & Harkness LLP Derek Okonkwo, Lead Associate, M&A, Calderwood & Harkness LLP Tiffany Rosenthal, Working Associate, M&A, Calderwood & Harkness LLP
DATE: August 22, 2023
RE: Draft Form CO Notification — Case M.11247 — Proposed Acquisition of Vectris Photonics, Inc. by Halcyon Semiconductor AG
Dear Dr. Hartmann and Dr. Breuer,
Please find enclosed the draft sections of the Form CO notification that we intend to submit to the European Commission Directorate-General for Competition ("DG Competition") on August 25, 2023, in connection with the proposed acquisition by Halcyon Semiconductor Aktiengesellschaft ("Halcyon") of sole control over Vectris Photonics, Inc. ("Vectris") (the "Transaction"). The notification will be filed under Council Regulation (EC) No 139/2004 of January 20, 2004 (the "EU Merger Regulation" or "EUMR").
As you are aware, the EUMR mandatory notification filing obligation arises because both Halcyon and Vectris meet the applicable turnover thresholds set forth in Article 1(2) of the EUMR. Specifically, the combined aggregate worldwide turnover of the undertakings concerned exceeds €5 billion, and the aggregate Community-wide turnover of each of at least two of the undertakings concerned exceeds €250 million. The concentration does not achieve more than two-thirds of its aggregate Community-wide turnover within one and the same Member State. Accordingly, the Transaction has a Community dimension and must be notified to the Commission prior to its implementation, in accordance with Article 4(1) of the EUMR.
This memorandum contains the principal substantive sections of the draft Form CO, including the description of the concentration, information about the parties, details of the transaction structure, proposed market definitions and affected markets analysis, competitive assessment, efficiencies case, preliminary observations regarding potential commitments, and a list of supporting documentation and annexes. Several data fields within the draft remain subject to final confirmation and have been marked accordingly. In particular, certain EEA market share figures for the co-packaged optics chiplet and silicon photonics transceiver module markets require final input from Halcyon's competitive intelligence team and from Ridgeline Partners LLC.
We respectfully request that you review this draft and provide any comments, corrections, or supplemental data by close of business on August 23, 2023 (Central European Time), to allow sufficient time for our team to finalize the notification and prepare the filing package for submission on August 25, 2023.
For reference, the parallel pre-merger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), was submitted to the U.S. Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice on August 18, 2023. The initial 30-day statutory waiting period under the HSR Act is currently set to expire on September 18, 2023, absent any extension by way of a Second Request for additional information or documentary material.
For detailed background on the competitive overlap analysis and our preliminary assessment of the antitrust risks associated with the Transaction in both the EU and U.S. jurisdictions, we refer you to our Antitrust Risk Assessment Memorandum dated July 10, 2023 (Calderwood & Harkness Work Product, Engagement No. 1032-00005), which was previously circulated to you and to the Halcyon Supervisory Board.
We remain available to discuss any aspect of this draft at your convenience and look forward to receiving your comments.
Respectfully,
Howard Bellamy Specialist Partner, Antitrust & Competition Calderwood & Harkness LLP
FORM CO NOTIFICATION COUNCIL REGULATION (EC) No 139/2004
CASE M.11247
HALCYON SEMICONDUCTOR / VECTRIS PHOTONICS
Proposed Acquisition of Sole Control of Vectris Photonics, Inc. by Halcyon Semiconductor Aktiengesellschaft
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SECTION 1: DESCRIPTION OF THE CONCENTRATION
1.1 Summary of the Transaction
This notification concerns the proposed acquisition of sole control of Vectris Photonics, Inc. ("Vectris" or the "Target"), a Delaware corporation, by Halcyon Semiconductor Aktiengesellschaft ("Halcyon" or the "Acquirer"), a German stock corporation (Aktiengesellschaft), by means of a reverse triangular merger effected under the Delaware General Corporation Law, Title 8 of the Delaware Code (the "DGCL") (the "Transaction" or the "Merger").
Specifically, the Transaction will be structured as follows: Halcyon Acquisition Sub, Inc. ("Merger Sub"), a Delaware corporation bearing Delaware Secretary of State File No. 7634291 and a wholly owned subsidiary of Halcyon formed on June 12, 2023, solely for the purpose of effecting the Merger, will merge with and into Vectris. Upon the effective time of the Merger, the separate corporate existence of Merger Sub will cease, and Vectris will survive the Merger as a wholly owned subsidiary of Halcyon. This structure is a standard reverse triangular merger under Sections 251 and 259 of the DGCL, whereby the target survives and becomes a subsidiary of the acquiring parent entity.
The aggregate consideration to be paid by Halcyon in connection with the Merger is $800,000,000 (eight hundred million U.S. dollars) in cash, which equates to approximately €735,000,000 (seven hundred thirty-five million euros) at the prevailing USD/EUR exchange rate as of August 10, 2023, the date of execution of the definitive merger agreement. The Transaction is structured as an all-cash acquisition, with no stock component and no contingent or earn-out consideration.
The per-share merger consideration payable to Vectris stockholders is approximately $13.70 per share on a fully diluted basis. The fully diluted share count of 58,394,160 shares consists of 51,200,000 basic shares of Vectris common stock outstanding as of the record date, plus 7,194,160 shares issuable upon the exercise or settlement of in-the-money stock options and restricted stock units ("RSUs") outstanding under Vectris's 2017 Equity Incentive Plan and 2021 Omnibus Equity Plan. In-the-money options and RSUs have been calculated using the treasury stock method in accordance with standard practice.
The per-share merger consideration of approximately $13.70 represents a premium of approximately 39.5% over Vectris's unaffected closing share price of $9.82 per share on May 19, 2023, the last full trading day prior to the first public report of market rumors regarding a potential transaction between the parties. The premium is also approximately 32.1% over Vectris's 30-day volume-weighted average price ("VWAP") of $10.37 for the period ending May 19, 2023, and approximately 44.8% over Vectris's 90-day VWAP of $9.46 for the period ending on the same date.
The terms of the Transaction are set forth in the Agreement and Plan of Merger, dated August 10, 2023, among Halcyon Semiconductor Aktiengesellschaft, Halcyon Acquisition Sub, Inc., and Vectris Photonics, Inc. (the "Merger Agreement"). A fully executed copy of the Merger Agreement will be provided to the Commission as Annex 1 to this notification.
1.2 Legal Basis for Notification
The concentration that is the subject of this notification has a Community dimension within the meaning of Article 1(2) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the "EU Merger Regulation" or "EUMR"), as amended.
The jurisdictional thresholds set forth in Article 1(2) of the EUMR are satisfied as follows:
(a) Combined aggregate worldwide turnover exceeds €5 billion. Halcyon's worldwide turnover for the financial year ended December 31, 2022 ("FY2022") was €6.8 billion. Vectris's worldwide turnover for FY2022 was $312 million, equivalent to approximately €296 million at the average 2022 USD/EUR exchange rate. The combined aggregate worldwide turnover of the undertakings concerned therefore exceeds €5 billion.
(b) Community-wide turnover of each of at least two of the undertakings concerned exceeds €250 million. Halcyon's aggregate Community-wide turnover for FY2022 was approximately €2.9 billion, which exceeds the €250 million threshold. Vectris's aggregate Community-wide turnover for FY2022 was approximately €87 million, which also exceeds the €250 million threshold. Accordingly, each of at least two of the undertakings concerned has aggregate Community-wide turnover exceeding €250 million.
(c) Two-thirds rule. Neither Halcyon nor Vectris achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State. Halcyon's Community-wide turnover is distributed across multiple Member States, with Germany (its largest single Member State market) accounting for approximately 38% of its Community-wide turnover, and no single Member State accounting for more than two-thirds. Vectris's Community-wide turnover is similarly distributed, with its principal EEA markets being the Netherlands, Germany, Ireland, and Sweden, none of which accounts for more than two-thirds of its total Community-wide turnover.
Notification of the concentration is therefore mandatory under Article 4(1) of the EUMR, which requires that concentrations with a Community dimension be notified to the Commission prior to their implementation and following the conclusion of the agreement. The applicable jurisdictional principles are further elaborated in the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (2008/C 95/01), to which the notifying party refers for supplemental guidance on turnover calculation methodologies and the concept of control.
The notification is submitted pursuant to the procedures set forth in Commission Regulation (EC) No 802/2004 of 21 April 2004, as amended, implementing Council Regulation (EC) No 139/2004, and specifically in accordance with the requirements of Form CO as set out in Annex I thereto.
1.3 Timetable
The anticipated timetable for the Transaction and the associated regulatory proceedings is as follows:
The Outside Date under the Merger Agreement is March 10, 2024, which is 180 calendar days from the date of execution of the Merger Agreement. Pursuant to Section 8.01(c) of the Merger Agreement, the Outside Date will automatically extend by 90 calendar days to June 10, 2024, if, as of March 10, 2024, the sole condition precedent to closing that has not been satisfied or waived is the receipt of all required antitrust approvals (including, without limitation, clearance under the EUMR and expiration or termination of the HSR Act waiting period). This extension mechanism is designed to provide sufficient flexibility to accommodate extended regulatory review periods, including the possibility of a Phase II in-depth investigation by the Commission.
1.4 Contact Information for the Notifying Party
The notifying party is Halcyon Semiconductor Aktiengesellschaft, a German stock corporation registered in the commercial register (Handelsregister) of the Munich District Court (Amtsgericht München) under registration number HRB 178254, with its registered office and principal place of business at Halcyon-Platz 1, 81739 München, Germany.
Halcyon's shares are publicly listed on the Frankfurt Stock Exchange under the ticker symbol HSAG. American Depositary Receipts representing Halcyon's ordinary shares are also listed on the Nasdaq Stock Market under the ticker symbol HCYN (ISIN: US40582R1095).
For purposes of these EUMR proceedings, the authorized representative and legal counsel of the notifying party is:
Howard Bellamy Specialist Partner, Antitrust & Competition Calderwood & Harkness LLP 1333 New Hampshire Avenue NW, Suite 700 Washington, DC 20036 United States of America Telephone: +1 (202) 555-0147
Email: h.bellamy@calderwoodharkness.com
All correspondence and communications from the Commission relating to this notification and to Case M.11247 should be directed to Mr. Bellamy at the address set forth above. The notifying party notes that it may, prior to or promptly following the formal filing of this notification, designate European local counsel for the purpose of receiving correspondence from the Commission, service of documents, and participation in meetings at DG Competition's premises in Brussels. The identity and contact details of such European local counsel will be communicated to the Commission by separate letter in advance of the filing date, or at the latest, at the time of filing.
SECTION 2: INFORMATION ABOUT THE PARTIES
2.1 The Acquirer — Halcyon Semiconductor Aktiengesellschaft
Full legal name: Halcyon Semiconductor Aktiengesellschaft
Registered office: Halcyon-Platz 1, 81739 München, Germany
Commercial register: HRB 178254, registered with the Munich District Court (Amtsgericht München)
Entity type: German stock corporation (Aktiengesellschaft), organized and existing under the laws of the Federal Republic of Germany
Public listing: Halcyon's ordinary shares (Stammaktien) are admitted to trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) under the ticker symbol HSAG (ISIN: DE000HSAG007). American Depositary Receipts ("ADRs"), each representing one ordinary share, are listed on the Nasdaq Stock Market under the ticker symbol HCYN (ISIN: US40582R1095). The ADR program is sponsored and administered by Ironclad National Bank, N.A., as depositary bank.
Senior Management and Governance:
• Vorstand (Management Board):
• Dr. Katarina Breuer — Chief Executive Officer (Vorstandsvorsitzende)
• Markus Ellinger — Chief Financial Officer (Finanzvorstand)
• Dr. Luisa Hartmann — General Counsel and Chief Legal Officer (Rechtsvorständin)
• Dr. Thomas Meier — Chief Technology Officer (Technologievorstand)
• Aufsichtsrat (Supervisory Board):
• Prof. Dr. Friedrich Wendt — Chairman of the Supervisory Board (Vorsitzender des Aufsichtsrats)
• The Supervisory Board consists of twelve members, six elected by the shareholders and six elected by employees in accordance with the German Codetermination Act (Mitbestimmungsgesetz). A complete list of Supervisory Board members is provided in Annex 7.
Financial Information:
Halcyon's consolidated revenue for FY2022 (fiscal year ended December 31, 2022) was €6.8 billion, representing an increase of approximately 11.5% over FY2021 revenue of €6.1 billion. FY2022 EBITDA (adjusted) was approximately €1.9 billion, with an EBITDA margin of approximately 27.9%. Halcyon's audited consolidated financial statements for FY2020, FY2021, and FY2022, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, are provided as Annex 3 to this notification. Halcyon's statutory auditor is Thornbury Wight LLP (lead engagement partner: Gavin Ashmore).
Halcyon's approximate market capitalization as of the date of execution of the Merger Agreement (August 10, 2023) was approximately €22.4 billion, based on the closing price of Halcyon's ordinary shares on the Frankfurt Stock Exchange on that date.
Business Description:
Halcyon Semiconductor AG is a leading global designer and manufacturer of advanced analog and mixed-signal semiconductors, power management integrated circuits ("ICs"), and radio-frequency ("RF") components. Halcyon serves a broad range of end markets, including automotive, industrial, communications infrastructure, consumer electronics, and data center applications.
Halcyon operates three semiconductor fabrication facilities ("fabs"):
(i) Munich Fab (Fab 1): Located at Halcyon's corporate headquarters campus in Munich, Germany. This facility specializes in advanced analog and mixed-signal process technologies, including Halcyon's proprietary BiCMOS and SiGe process nodes. Cleanroom capacity of approximately 45,000 wafer starts per month (200mm equivalent).
(ii) Dresden Fab (Fab 2): Located in the Saxony technology cluster in Dresden, Germany. This facility focuses on power management ICs and advanced packaging processes, including wafer-level chip-scale packaging ("WLCSP") and fan-out wafer-level packaging ("FOWLP"). Cleanroom capacity of approximately 30,000 wafer starts per month (300mm).
(iii) Singapore Fab (Fab 3): Located in the Jurong semiconductor manufacturing district in Singapore. This facility produces RF components and, more recently, silicon photonics devices. Cleanroom capacity of approximately 25,000 wafer starts per month (200mm equivalent).
EEA Activities:
Halcyon has substantial operations and commercial activities throughout the European Economic Area. Its Munich and Dresden fabs constitute its primary manufacturing base, and it maintains significant research and development centers in Munich, Dresden, Eindhoven (Netherlands), and Lund (Sweden). Halcyon sells its products to customers across all major European markets, including Germany, France, the Netherlands, Italy, Sweden, Finland, Ireland, and Austria, among others.
Of particular relevance to this notification, Halcyon's product portfolio includes silicon photonics transceiver modules and co-packaged optics ("CPO") chiplets, which are manufactured at Halcyon's Singapore Fab and sold globally, including to European cloud infrastructure operators and data center operators. Halcyon entered the silicon photonics market through a combination of internal research and development investment beginning in approximately 2018 and the acquisition of certain silicon photonics design assets from a smaller firm in 2020. Halcyon's CPO chiplet product line is at a relatively early stage of commercialization, with initial product shipments to select customers having commenced in the second half of 2022.
Halcyon's estimated share of the EEA market for co-packaged optics chiplets is to be detailed in Section 4 of this notification. Preliminary estimates, based on available industry data and internal revenue figures, suggest an EEA market share of approximately [X]%. This figure is subject to confirmation following receipt of final market data from Halcyon's competitive intelligence team and from Ridgeline Partners LLC, Halcyon's financial advisor.
Halcyon does not have any subsidiaries or affiliates that are separately relevant to the affected markets identified in this notification, beyond Halcyon's own product lines as described above. A complete list of Halcyon's subsidiaries and affiliates is provided in Annex 8.
2.2 The Target — Vectris Photonics, Inc.
Full legal name: Vectris Photonics, Inc.
Registered office: 4750 Ridgepoint Drive, Suite 300, San Jose, California 95134, United States of America
State of incorporation: Delaware; certificate of incorporation filed with the Delaware Secretary of State on September 14, 2015; File No. 5918437
Registered agent in Delaware: Capitol Corporate Services, LLC, 800 N. King Street, Suite 400, Wilmington, Delaware 19801
Entity type: C-Corporation organized under the DGCL
Senior Management:
• Dr. Anand Raghavan — Founder, Chairman of the Board, and Chief Executive Officer
• Margaret "Maggie" Sørensen — President and Chief Operating Officer
• Julian Tate — Chief Financial Officer
• Rebecca Lau — General Counsel and Corporate Secretary
Board of Directors:
• Dr. Anand Raghavan — Chairman (management director; founder)
• Margaret Sørensen — Director (management director)
• Julian Tate — Director (management director)
• David Kwon — Independent Director
• Dr. Elena Mirescu — Independent Director
• Rhys Calloway — Director (designee of Granite Peak Ventures Fund IV, L.P., pursuant to the Investors' Rights Agreement dated February 22, 2019)
• Simone Achterberg — Director (designee of Nordhaven Capital Partners III, L.P., pursuant to the Investors' Rights Agreement dated February 22, 2019)
Financial Information:
Vectris's total revenue for FY2022 (fiscal year ended December 31, 2022) was $312 million, representing an increase of approximately 26.8% over FY2021 revenue of $246 million. FY2022 EBITDA (adjusted) was $74 million, with an EBITDA margin of approximately 23.7%. Vectris's audited financial statements for FY2020, FY2021, and FY2022, prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), are provided as Annex 4 to this notification. Vectris's independent registered public accounting firm is Linden Ross & Co., LLP (lead engagement partner: Christine Park).
Employees:
As of August 1, 2023, Vectris employed approximately 1,450 persons worldwide. The majority of Vectris's employees are based in the United States, primarily at its headquarters in San Jose, California, and at its design center in Austin, Texas. Vectris also maintains a small engineering team in London, United Kingdom, and a sales and field applications engineering presence in Amsterdam, the Netherlands.
Business Description:
Vectris Photonics, Inc. is a fabless designer of silicon photonics transceivers and co-packaged optics chiplets for hyperscale data center interconnects. Founded in 2015 by Dr. Anand Raghavan, a former Stanford University professor of electrical engineering and a recognized pioneer in silicon photonics technology, Vectris has rapidly established itself as a technology leader in the silicon photonics industry. Vectris designs its products in-house and contracts out the fabrication of its silicon photonics wafers to leading third-party semiconductor foundries, consistent with the fabless business model employed by many advanced semiconductor design companies.
Vectris's primary products include:
(i) Silicon Photonics Transceiver Modules: High-speed pluggable optical transceiver modules utilizing silicon photonics technology, designed for 400G and 800G data center interconnect applications. These modules are compliant with industry-standard form factors, including QSFP-DD and OSFP, and are deployed in spine-to-leaf switching architectures within hyperscale data centers.
(ii) Co-Packaged Optics (CPO) Chiplets: Optical engine chiplets designed for direct co-packaging with network switch ASICs or other semiconductor devices. Vectris's CPO chiplets eliminate the need for separate pluggable transceiver modules by integrating optical functionality at the die or package level, offering potential advantages in power efficiency, bandwidth density, and latency. Vectris's CPO chiplet platform has been developed through extensive internal R&D and is currently in commercial deployment with select hyperscale customers.
intellectual Property:
Vectris holds a substantial and strategically significant portfolio of intellectual property relating to silicon photonics design, manufacturing, and packaging. As of July 31, 2023, Vectris holds 187 issued U.S. patents and 43 pending U.S. patent applications. Vectris's patent portfolio covers, among other things, silicon photonics modulator designs, germanium-on-silicon photodetector architectures, waveguide coupling techniques, optical engine chiplet packaging methodologies, and fiber array attachment processes. Vectris also holds a number of foreign patent counterparts in key jurisdictions, including the European Patent Office (EPO), Japan, South Korea, China, and Taiwan. A summary of Vectris's patent portfolio will be provided in the annexes to this notification.
Key Customers:
Vectris's customer base is concentrated among the world's largest hyperscale cloud operators. Three of the top five U.S. hyperscale cloud operators (ranked by revenue) are current Vectris customers, and Vectris has active commercial relationships with several additional hyperscale and large enterprise data center operators. Vectris's products are also supplied to European cloud infrastructure operators and data center providers.
EEA Activities:
Vectris sells co-packaged optics chiplets and silicon photonics transceiver modules to European hyperscale cloud operators and data center operators. Vectris's EEA revenues are generated through direct commercial relationships with European customers, rather than through a dedicated EEA distribution or reseller network. Vectris does not operate any manufacturing facilities within the EEA; however, as noted above, Vectris maintains a small engineering team in London, United Kingdom, and a sales and field applications engineering office in Amsterdam, the Netherlands. Vectris's aggregate Community-wide turnover for FY2022 was approximately €87 million.
Vectris's estimated share of the EEA market for co-packaged optics chiplets is to be detailed in Section 4 of this notification. A preliminary estimate of approximately [Y]% is subject to confirmation pending final market data.
Significant Shareholders:
The ownership structure of Vectris Photonics, Inc. as of August 1, 2023, is as follows:
Dr. Raghavan, Granite Peak Ventures Fund IV, L.P., and Nordhaven Capital Partners III, L.P. have entered into the Voting and Support Agreement described in Section 3.2 below, pursuant to which they have agreed to vote their shares in favor of the Merger. Together, these stockholders hold approximately 55.4% of Vectris's outstanding shares, which exceeds the simple majority required under the DGCL for approval of the Merger by the Vectris stockholders.
2.3 The Merger Sub
Full legal name: Halcyon Acquisition Sub, Inc.
State of incorporation: Delaware; certificate of incorporation filed with the Delaware Secretary of State on June 12, 2023; File No. 7634291
Registered agent in Delaware: Pinnacle Corporate Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801
Entity type: C-Corporation organized under the DGCL, formed as a wholly owned subsidiary of Halcyon Semiconductor Aktiengesellschaft solely for purposes of effecting the reverse triangular merger contemplated by the Merger Agreement
Sole Director: Markus Ellinger (Chief Financial Officer of Halcyon Semiconductor AG)
Operations and Assets: Merger Sub has no independent business operations, no revenues, no employees, and no material assets other than those incidental to its incorporation and its role as a party to the Merger Agreement. Merger Sub was formed exclusively for the purpose of the Transaction and has not engaged in any activities other than those incident to its formation and the execution of the Merger Agreement and related transaction documents.
Upon the effective time of the Merger, Merger Sub will merge with and into Vectris Photonics, Inc. pursuant to the terms of the Merger Agreement. At the effective time, the separate corporate existence of Merger Sub will cease, and Vectris will survive the Merger as a wholly owned subsidiary of Halcyon.
2.4 Financial Advisors
Acquirer's Financial Advisor:
Ridgeline Partners LLC is acting as exclusive financial advisor to Halcyon Semiconductor AG in connection with the Transaction. The Ridgeline engagement team is led by Nathaniel Cross (Lead Managing Director) and Priya Narayanan (Vice President). Ridgeline's principal office address is 383 Madison Avenue, 25th Floor, New York, New York 10179. Ridgeline has provided financial advisory services to Halcyon in connection with the structuring, negotiation, and execution of the Merger Agreement, and is assisting with the preparation of market analyses and financial projections relevant to the regulatory approval process.
Target's Financial Advisor:
Clearwater Zanthor & Co., LLC is acting as exclusive financial advisor to Vectris Photonics, Inc. in connection with the Transaction. The Clearwater Zanthor engagement team is led by Diane Okoro (Lead Managing Director). Clearwater Zanthor's principal office address is 555 California Street, Suite 2800, San Francisco, California 94104. In connection with the Transaction, Clearwater Zanthor provided a written fairness opinion to the Vectris Board of Directors, dated August 9, 2023, opining that, as of that date and based upon and subject to the assumptions, qualifications, and limitations set forth therein, the per-share merger consideration of approximately $13.70 to be received by holders of Vectris common stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. The Clearwater Zanthor fairness opinion was a material factor considered by the Vectris Board of Directors in approving and recommending the Transaction to Vectris stockholders.
2.5 Counsel
Acquirer's Counsel:
Calderwood & Harkness LLP is acting as legal counsel to Halcyon Semiconductor AG in connection with the Transaction. The Calderwood & Harkness engagement team includes:
• Oliver Mackenzie — Responsible Partner, M&A (New York office: 599 Lexington Avenue, 38th Floor, New York, NY 10022)
• Howard Bellamy — Specialist Partner, Antitrust & Competition (Washington, DC office: 1333 New Hampshire Avenue NW, Suite 700, Washington, DC 20036)
• Derek Okonkwo — Lead Associate, M&A (New York office)
• Tiffany Rosenthal — Working Associate, M&A (New York office)
Mr. Bellamy serves as the authorized representative and counsel for Halcyon for purposes of the EUMR proceedings and the parallel HSR Act review process.
Target's Counsel:
Whitfield, Prager & Loomis LLP is acting as legal counsel to Vectris Photonics, Inc. in connection with the Transaction. The Whitfield, Prager & Loomis engagement team includes:
• Catherine Whitfield — Lead Partner, M&A (Menlo Park office)
• Douglas Prager — Partner, Antitrust & Competition (New York office)
Whitfield, Prager & Loomis LLP is advising the Vectris Board of Directors on all M&A and antitrust matters relating to the Transaction, including the Target's cooperation obligations with respect to regulatory filings and approvals.
SECTION 3: DETAILS OF THE CONCENTRATION
3.1 Nature of the Concentration
The Transaction constitutes a concentration within the meaning of Article 3(1)(b) of the EUMR. Specifically, the Transaction involves the acquisition of sole control by Halcyon Semiconductor Aktiengesellschaft over Vectris Photonics, Inc. within the meaning of Article 3(1)(b), second alternative, of the EUMR.
Following the consummation of the Merger, Vectris Photonics, Inc. will be a wholly owned subsidiary of Halcyon Semiconductor AG. Halcyon will hold 100% of the outstanding equity interests in Vectris and will exercise sole and exclusive control over Vectris's strategic commercial decisions, including decisions regarding budget, business plan, appointment of senior management, and investment. The Transaction therefore constitutes an acquisition of sole control within the meaning established by the Commission's Consolidated Jurisdictional Notice (paragraphs 54-60).
The Transaction constitutes a concentration for the purposes of the EUMR because Halcyon will acquire sole control over Vectris, which is currently an independent undertaking not controlled by Halcyon. Prior to the Transaction, there is no pre-existing ownership link, equity participation, control relationship, or joint venture arrangement between Halcyon and Vectris. The two parties are independent competitors in certain semiconductor product markets, as described in greater detail in Sections 4 and 5 below. The Transaction will bring these two previously independent undertakings under common ownership and control for the first time.
The concentration will be implemented by means of a reverse triangular merger under the DGCL, as described in Section 1.1 above. Upon the effective time of the Merger, all outstanding shares of Vectris common stock (other than certain excluded shares, including shares owned by Halcyon, Merger Sub, or Vectris as treasury shares, and shares with respect to which appraisal rights have been properly perfected under Section 262 of the DGCL) will be automatically converted into the right to receive the per-share merger consideration of approximately $13.70 in cash, without interest. No further action by Vectris stockholders will be required following the effective time.
3.2 Transaction Documents
The Transaction is documented by the following principal agreements and instruments, each of which has been duly executed by the respective parties thereto:
(a) Agreement and Plan of Merger (the "Merger Agreement"): Dated August 10, 2023, among Halcyon Semiconductor Aktiengesellschaft, Halcyon Acquisition Sub, Inc., and Vectris Photonics, Inc. The Merger Agreement sets forth the terms and conditions of the reverse triangular merger, including the merger consideration, representations and warranties of each party, pre-closing covenants (including the conduct of business covenants applicable to Vectris and the mutual obligation of the parties to use reasonable best efforts to obtain all required regulatory approvals), conditions precedent to closing, termination provisions, and the indemnification and escrow arrangements. A fully executed copy of the Merger Agreement is provided as Annex 1.
(b) Voting and Support Agreement: Dated August 10, 2023, among Halcyon Semiconductor Aktiengesellschaft, Dr. Anand Raghavan, Granite Peak Ventures Fund IV, L.P., and Nordhaven Capital Partners III, L.P. (collectively, the "Supporting Stockholders"). Pursuant to the Voting and Support Agreement, the Supporting Stockholders have irrevocably agreed to vote all shares of Vectris common stock beneficially owned by them (collectively, approximately 55.4% of Vectris's outstanding shares as of the record date) in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, and against any competing acquisition proposal. The Voting and Support Agreement terminates upon the earlier of (i) the effective time of the Merger, (ii) the valid termination of the Merger Agreement in accordance with its terms, or (iii) any material amendment to the Merger Agreement that reduces the per-share merger consideration or materially modifies the form of consideration without the prior written consent of the Supporting Stockholders. A fully executed copy of the Voting and Support Agreement is provided as Annex 2.
(c) Escrow Agreement: Dated August 10, 2023, among Halcyon Semiconductor Aktiengesellschaft, Vectris Photonics, Inc., and Ironclad National Bank, N.A., as escrow agent. Pursuant to the Escrow Agreement, $40,000,000 of the aggregate merger consideration will be deposited into an escrow account at Ironclad National Bank, N.A. to serve as a source of recovery for Halcyon in respect of any post-closing indemnification claims arising from breaches of Vectris's representations and warranties or covenants in the Merger Agreement. The escrow amount will be held for a period of 18 months following the closing date, subject to customary release and claims procedures.
(d) Financing Commitment Letter: Dated August 8, 2023, from Meridian Atlantic Bank, N.A. to Halcyon Semiconductor Aktiengesellschaft. Pursuant to the Financing Commitment Letter, Meridian Atlantic Bank, N.A. has committed to provide a senior secured term loan facility in the aggregate principal amount of $500,000,000 to fund a portion of the aggregate merger consideration. The material terms of the committed financing are described in Section 3.3 below.
Fully executed copies of each of the foregoing transaction documents will be submitted as annexes to this Form CO notification, as identified in Section 8 below.
3.3 Consideration and Financing
The aggregate consideration payable by Halcyon in connection with the Transaction is $800,000,000 in cash. The Transaction is an all-cash acquisition with no stock consideration, no contingent consideration, no earn-out arrangements, and no seller financing.
The consideration will be funded from two sources:
(a) Senior Secured Term Loan — $500,000,000: Meridian Atlantic Bank, N.A. has provided a financing commitment letter dated August 8, 2023, committing to provide a senior secured term loan facility in the aggregate principal amount of $500,000,000. The principal terms of the committed financing are as follows:
• Borrower: Halcyon Semiconductor Aktiengesellschaft (or a wholly owned subsidiary designated by Halcyon)
• Lender: Meridian Atlantic Bank, N.A.
• Facility type: Senior secured term loan
• Principal amount: $500,000,000
• Interest rate: Term SOFR + 225 basis points per annum
• Structure: 364-day bridge facility, with customary provisions for replacement with permanent term loan financing or capital markets take-out
• Ticking fee: 20 basis points per annum on undrawn commitment, commencing November 8, 2023 (90 days following the date of the commitment letter)
• Security: To be secured by a first-priority lien on certain assets of Halcyon and its subsidiaries, as set forth in the definitive credit documentation (to be negotiated and executed prior to closing)
• Conditions to funding: Customary conditions to funding, including the substantially simultaneous consummation of the Merger, the accuracy of certain representations and warranties, and the absence of a material adverse effect with respect to Halcyon
(b) Cash on Hand — $300,000,000: The balance of the aggregate merger consideration ($300,000,000) will be funded from Halcyon's existing cash reserves. As of June 30, 2023, Halcyon reported cash, cash equivalents, and short-term investments of approximately €1.4 billion on its consolidated balance sheet. Accordingly, Halcyon has ample liquidity to fund its cash contribution to the merger consideration from existing resources.
The financing structure has been assessed by Ridgeline Partners LLC and Halcyon's treasury team and is expected to result in pro forma net leverage within Halcyon's target range. The financing is not subject to any material conditions that would create uncertainty as to the availability of funds at closing, beyond the customary conditions described above.
3.4 Conditions Precedent to Closing
The consummation of the Merger is subject to the satisfaction or waiver of the following conditions precedent, as set forth in Article VII of the Merger Agreement:
(a) Antitrust Approvals. Receipt of all required antitrust and competition law approvals, including:
(i) Clearance of the concentration under the EUMR, by either (A) a decision by the Commission that the concentration is compatible with the internal market under Article 6(1)(b) of the EUMR (or Article 6(2), if conditional upon compliance with commitments), or (B) the expiration of the applicable review period without the Commission having issued a decision;
(ii) Expiration or early termination of the applicable waiting period under the HSR Act (15 U.S.C. § 18a), or obtaining clearance from the U.S. Department of Justice or the U.S. Federal Trade Commission, as applicable; and
(iii) Receipt of any other antitrust or competition law approvals required in connection with the Transaction under the laws of any other applicable jurisdictions (the parties are currently assessing whether filings are required in additional jurisdictions, including the United Kingdom (CMA), Germany (Bundeskartellamt), and other Member States where residual national filing obligations may apply).
(b) Vectris Stockholder Approval. Approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Vectris common stock entitled to vote thereon, in accordance with Section 251 of the DGCL and Vectris's certificate of incorporation and bylaws. As noted in Section 2.2 above, the Voting and Support Agreement secures the affirmative vote of approximately 55.4% of Vectris's outstanding shares, which exceeds the required majority.
(c) Accuracy of Representations and Warranties. The representations and warranties of each party contained in the Merger Agreement must be true and correct in all material respects (subject to customary materiality and material adverse effect qualifiers) as of the date of the Merger Agreement and as of the closing date, as though made on and as of such date (except for representations and warranties that speak as of a specific date, which must be true and correct as of such date).
(d) Compliance with Covenants. Each party must have complied in all material respects with its covenants and agreements set forth in the Merger Agreement.
(e) No Legal Restraints. There must be no law, order, injunction, decree, or other legal restraint enacted, entered, promulgated, enforced, or issued by any court of competent jurisdiction or governmental authority that is in effect and that prohibits, restrains, enjoins, or makes illegal the consummation of the Merger.
(f) No Material Adverse Effect. Since the date of the Merger Agreement, there must not have occurred any event, change, circumstance, or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement) on Vectris.
Outside Date. If the Merger has not been consummated on or before March 10, 2024 (the "Outside Date"), either Halcyon or Vectris may terminate the Merger Agreement pursuant to Section 8.01(b)(i) thereof, provided that the terminating party's failure to perform its obligations under the Merger Agreement has not been the primary cause of the failure to close by such date. Pursuant to Section 8.01(c) of the Merger Agreement, the Outside Date will automatically extend by 90 calendar days to June 10, 2024 (the "Extended Outside Date"), if, as of the initial Outside Date, the sole condition precedent to closing that has not been satisfied or waived is the receipt of all required antitrust approvals described in Section 3.4(a) above.
3.5 Post-Completion Structure
Upon consummation of the Merger, the corporate structure of the combined enterprise will be as follows:
(a) Vectris Photonics, Inc. will survive the Merger and will continue to exist as a Delaware corporation and a wholly owned subsidiary of Halcyon Semiconductor Aktiengesellschaft.
(b) Halcyon Acquisition Sub, Inc. will cease to exist upon the effective time of the Merger, its separate corporate existence having terminated by operation of the reverse triangular merger.
(c) Halcyon Semiconductor Aktiengesellschaft will remain the ultimate parent entity of the combined group, publicly listed on the Frankfurt Stock Exchange and the Nasdaq Stock Market, with its corporate headquarters in Munich, Germany.
Halcyon intends to integrate Vectris's silicon photonics design capabilities and its co-packaged optics chiplet product line into Halcyon's broader semiconductor platform. The integration plan, which is at a preliminary stage and remains subject to further development following the closing of the Transaction, contemplates the following principal elements:
(i) Integration of Vectris's silicon photonics design team into Halcyon's existing photonics engineering organization, with the goal of combining Halcyon's analog and mixed-signal design expertise with Vectris's silicon photonics modulator and photodetector technology to create a best-in-class photonic-electronic design capability.
(ii) Migration of Vectris's silicon photonics wafer fabrication from third-party foundries to Halcyon's in-house fabs (primarily the Singapore Fab) over a 12-to-24-month transition period, subject to customer qualification requirements.
(iii) Preservation of Vectris's existing customer relationships and go-to-market organization, including Vectris's direct relationships with hyperscale cloud operators.