FILED
BY JAZZ TECHNOLOGIES, INC.
PURSUANT
TO RULE 425 UNDER THE SECURITIES ACT OF 1933
AND
DEEMED FILED PURSUANT TO RULE 14a-12
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
SUBJECT
COMPANY: JAZZ TECHNOLOGIES, INC.
COMMISSION
FILE NO. 1-32832
Jazz Semiconductor Frequently Asked Questions (FAQs)
(External & Internal document)
Q:
Who is Tower
Semiconductor?
A:
Tower Semiconductor Ltd. is an independent specialty foundry located in
Migdal Haemek in Israel, near Haifa. Tower manufactures five advanced CMOS technologies,
including digital CMOS, mixed-signal and RF CMOS, CMOS image sensors, power
management devices, and embedded non-volatile memory. Tower is a public company traded on the NASDAQ
Global Market and on the TASE exchange under the symbol TSEM. Revenue for 2007 grew 23% from 2006 to $231
million in 2007. Tower has two fabs in
Israel, a six-inch fab (Fab1) with approximately 15,000 wafer starts per month
capacity and an eight-inch fab (Fab 2) with up to 30,000
wafer
starts per month capacity. The company offers standard and specialized process
technologies ranging from 1.0 micron to 130 nm. Tower is known for its high
quality, strong engineering skills and its excellent delivery performance and
customer service (www.towersemi.com).
Q
Why is Tower interested in
merging with Jazz?
A:
The merger would create
the largest
specialty foundry and the seventh largest pure-play foundry in the world
.
Jazz process technologies and customer base
are complementary to Tower with little overlap. We expect that the combined
company will better serve our customers desire for increased analog
integration and fewer analog foundry suppliers and Tower believes that Jazzs
position as a pure play foundry providing specialty analog process technologies
presents an exciting opportunity to address market and technology shifts in the
coming years.
Q.
Why is Jazz interesting in
merging with Tower?
A.
Teaming with Tower will make
Jazz larger and more competitive for our current customers and allow us to
broaden our customer base with new technologies. In particular, we believe Towers embedded
non-volatile memory (NVM) technology and their copper 130 nm technology will be
attractive to our customer base when integrated with our BCD and SiGe process
technologies. We also expect the merger
to enhance our ability to access capital to fund our strategic initiatives,
including potential expansions into new applications, executing a more
ambitious product roadmap, expanding manufacturing capacity, and expanding
manufacturing capacity.
Q.
What will happen to Jazz
Technologies and Jazz Semiconductor after the merger is completed?
A:
Under the terms of the
merger agreement, each outstanding share of Jazz common stock will be converted
into the right to receive 1.8 Tower ordinary shares. Both Jazz and its
subsidiary, Jazz Semiconductor, Inc., would become wholly owned
subsidiaries of Tower Semiconductor.
Q
What will be the business strategy for the combined
companies?
A:
We believe Tower and Jazz
have complementary business strategies. Tower has two distinct customer
engagement strategies. The first is a
Process Transfer program. They have multiple customers in which they have
transferred customer-owned process technologies from IDMs into their fabs. This provides them a high volume IDM order
rate for business stability. The second
is their Specialty Segment strategy.
These are Tower developed specialty processes including such segments as
high end CIS studio camera and medical X-ray, mixed-signal for high fidelity
audio systems, very high ESD rating for high speed interfaces (e.g. analog switches,
USB switches), advanced power management for lighting, DC to DC converters, gas
gauges, and high precision analog targeted at aerospace/defense and other high
reliability markets (e.g. medical, automotive, industrial).
Q
How will the combined companies be merged and managed? What
will the new organization look like?
A:
It is important that neither
company impact existing customer business levels and support. Therefore, Jazz
is expected to operate as a wholly owned subsidiary of Tower. Final details of organization integration
are expected to be developed over the next several months.
Q:
What will be the total
number of employees for the combined entity?
A:
Tower has about
1,400 employees and Jazz has about 700 employees. Final details of organization
integration are expected to be developed over the next several months.
Q:
What will be the total
capacity for the combined entity?
A:
The combined company is
expected to have a capacity of approximately 750,000 eight inch equivalent
wafers a year, which the companies believe can be further expanded to over 900,000
wafers annually. This is about triple
the current Jazz capacity.
Q:
What are the financial
details of the merger?
A:
The deal is a stock-for-stock transaction. Under the terms of the
merger agreement, Jazz stockholders will receive, in a tax-free transaction,
1.8 ordinary shares of Tower for every share of Jazz common stock.
Q:
Who will own the combined
company after the merger?
A:
The
merged company will be owned by the stockholders of both companies. Upon closing of the transaction, Jazz
stockholders will own approximately 12% of the combined company on a pro forma
fully diluted basis.
Q:
Who will manage the merged company?
A:
The merged company will be
headed by the current Tower CEO, Russell Ellwanger. He will spend time at both
the company headquarters in Israel as well as our subsidiary headquarters in
Newport Beach. The rest of the merged
company executive team has not yet been determined.
2
Q:
What is the financial
picture for the combined entity?
A:
On a pro forma basis, assuming the merger had occurred on January 1,
2007, the combined company would have had $439M in annual revenues in 2007.
Q.
How does this affect the
cost structure?
A.
Excluding
including implementation costs, Tower and Jazz believe the combination could
generate as much as $40 million in annual gross synergies resulting from the
elimination of duplicate spending and overlapping functions, improved supplier
pricing, avoidance of planned expenditures, and manufacturing scale.
Q:
Will the new merged entity
continue to be public? If so, what will
be the ticker symbol?
A:
Both Jazz and Tower are currently publicly traded. Shares of Tower are expect to continue to
trade on the NASDAQ Global Market and the Tel Aviv Stock Exchange under the
symbol TSEM.
Q:
Will Jazz continue to be
run from Newport Beach?
A:
The current plan is for Jazz
Semiconductors business to continue to be managed from Newport Beach as a
wholly owned subsidiary.
Q:
How will the merger affect Jazz Semiconductors facilities?
A:
We expect to continue to
operate the Newport Beach facility,
and we expect our relationships with our current manufacturing partners in
China to remain unchanged.
Q:
What will the name of the combined company be?
A:
No decisions have been made
on future naming. However, the Jazz name
has good brand recognition in the analog space and it is possible that the Jazz
name may survive.
Q
Will the Newport Beach facility continue to work with
Aerospace and Defense?
A:
Yes, Aerospace and Defense
is viewed as strategic to the new company.
Q:
How will the merger affect
customers?
A:
We intend to maintain the
existing sales and support structure for customer interface to maximize the
transparency to customers. Our customers should expect the same level of
service, quality and support they have received in the past from Jazz.
Q:
Will this merger result in any job losses?
A:
At this point there are no reductions in
workforce planned as a result of the merger.
Going forward, staffing levels will continue to be determined by the
business strategic direction and performance.
Q:
When
will the merger be completed?
A:
The boards of directors of Tower and Jazz have
approved the transaction, which is expected to close in Q4 2008 and is subject
to approval by Jazz stockholders and other customary closing conditions. Until that time, both companies will continue
to operate independently.
3
INTERNAL FAQs
Employee Compensation, Stock and Benefits Questions
Q:
Q:
What
is going to happen to the existing Jazz stock options that I hold, both vested
and unvested? Will this transaction
change the vesting schedule for any of my options? Will there be a change in the exercise price
for these options?
A:
Upon the
closing of the merger, your existing stock options will remain in place and
will be converted into options to acquire Tower stock. Each option to purchase one share of Jazz
stock at a specified exercise price would become an option to purchase 1.8
ordinary shares of Tower. The vesting
schedule for your options would remain unchanged. For example, options that were granted on
2/19/08 would continue to use 2/19/08 as the base period. The exercise price for your option would be
whatever the exercise price was for your Jazz option divided by 1.8. As an example, if you have 200 options to
acquire Jazz stock now
and your
exercise price is $3.27 per share, after the merger you would have 360 options
to acquire Tower stock and your exercise price would be $1.82. As another example, if you have 300 options
to acquire Jazz stock with an exercise price of $1.09, after the merger you
would have 540 options to acquire Tower stock and your exercise price would be
$0.606. Again, you would continue with
the same grant date and vesting schedule.
Q:
W
ill my current stock be converted to
ordinary shares of Tower?
A:
Yes, if you own
shares of Jazz stock, those shares will be converted to
ordinary shares of Tower. Each share of
Jazz common stock will be converted into 1.8 ordinary shares of Tower.
Q:
Will I receive additional stock options
after the merger? If yes, when will that
occur?
A:
It is possible that the post-merger company
will offer additional stock options in the future. The timing of additional option grants,
however, has yet to be determined.
Q:
Since Tower is publicly traded, will there
be an employee stock purchase program for employees?
A:
We do not anticipate offering a stock purchase
program at this time.
Q:
Will my job title and
salary grade be the same?
A:
We do not
anticipate significant changes due to the merger. Just as Jazz could change titles and salaries
currently, the merged company reserves the right to do so in the future.
Q:
Will my pay stay the same?
A:
We do not
expect any immediate impact on your pay as a result of this transaction. Just as Jazz could change your pay currently,
the merged company reserves the right to continue to do so in the future.
Q:
Will
I continue to receive my shift pay?
A:
Yes. Shift premiums are not anticipated to change
due to this transaction.
4
Q:
Will there be any changes to the current benefits programs?
A:
We do not anticipate any
changes for the 2008 benefits programs. However, all programs for salaried
employees have always been subject to change by the board of directors and the
same will be true in the future.
Benefits for the hourly BU employees are governed by the terms of the
recently-ratified collective bargaining agreement.
Q:
Will the company still have recognition awards programs?
A:
We do not currently anticipate any
changes to these programs.
However, all
programs have always been subject to change by the board of directors and the
same will be true in the future.
Q:
Will there continue to be
a company match to the 401(k) plan in 2008?
A:
We do not presently
anticipate any change. However, all
programs for salaried employees have always been subject to change by the board
of directors and the same will be true in the future. The 401(k) program for the hourly BU
employees is governed by the terms of the recently-ratified collective
bargaining agreement.
Q
:
What happens to my flexible spending account(s)?
A:
We do not presently anticipate any
change.
However, all programs have
always been subject to change by the board of directors and the same will be
true in the future.
Q:
Will there be a tuition
reimbursement program?
A:
We do not currently anticipate any
change.
However, all programs have
always been subject to change by the board of directors and the same will be
true in the future. The tuition
reimbursement program for the hourly BU employees is governed by the terms of
the recently-ratified collective bargaining agreement.
Q:
Will there be any changes
to the holiday schedule in 2008?
A:
The holiday
schedule for the remainder of 2008 and beyond is now being finalized and will
be announced prior to the end of May.
Q:
Will
the International Brotherhood of Electrical Workers (IBEW) continue to
represent Fab employees?
A:
Yes, we
anticipate that the IBEW will continue to represent Fab employees.
Forward-Looking Statements
This document contains forward-looking statements
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, including statements concerning Towers proposed
merger with Jazz. These statements are
based on managements current expectations and beliefs and are subject to a
number of risks, uncertainties and assumptions that could cause actual results
to differ materially from those described in the forward-looking
statements. All statements other than statements
of historical fact are statements that could be deemed forward-looking
statements. For example, statements of expected synergies, customer benefits,
costs savings, financial guidance, the timing of closing, industry ranking,
execution of integration plans and management and organizational structure are
all forward-looking statements. The potential risks and uncertainties include,
among others, the possibility that the merger does not close or that the
closing may be delayed, that expected customer benefits, synergies and costs
savings will not be achieved or that the companies are unable to successfully
execute their integration strategies, that the companies may be required to
modify the terms of the transaction to achieve regulatory approval or for other
reasons, that prior to or after the closing of the merger, the businesses of
the companies may suffer due to uncertainty, as well as other risks applicable
to both Towers and Jazzs business described in the reports filed by Tower and
Jazz with the
5
Securities and Exchange Commission (the SEC) and, in
the case of Tower, the Israel Securities Authority. These filings identify and address other
important factors that could cause Towers and Jazzs respective financial and
operational results to differ materially from those contained in the
forward-looking statements set forth in this document. Accordingly, no
assurances can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them do so,
what impact they will have on the results of operations or financial condition
of Tower or Jazz. Tower and Jazz are
providing this information as of the date of this document and neither Tower
nor Jazz undertakes any obligation to update any forward-looking statements
contained in this document as a result of new information, future events or
otherwise.
Additional Information about the Proposed Merger
and Where to Find It
In connection with the proposed merger, Tower intends
to file with the SEC a Registration Statement on Form F-4 that will
contain a Proxy Statement/Prospectus and related materials and Jazz expects to
mail to its stockholders the final Proxy Statement/Prospectus containing
information about Tower, Jazz and the proposed merger. INVESTORS AND SECURITY
HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND THE OTHER RELEVANT
MATERIALS, CAREFULLY AND IN THEIR ENTIRETY, WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT TOWER, JAZZ AND THE PROPOSED
MERGER. Investors and security holders
will be able to obtain free copies of the Registration Statement on Form F-4,
the Proxy Statement/Prospectus and other relevant materials and documents filed
by Tower or Jazz with the SEC, when they become available, through the web site
maintained by the SEC at www.sec.gov. In addition, investors and security
holders may obtain free copies of the documents relating to the proposed merger
filed with the SEC by Tower by directing a request by mail to Tower
Semiconductor Ltd, P.O. BOX 619, Migdal Haemek, Israel 23105, Attn:
Investor Relations or by telephone at +972-4-6506936. Investors and security
holders may obtain free copies of the documents relating to the proposed merger
filed with the SEC by Jazz by directing a request by mail to Jazz Technologies, Inc.,
4321 Jamboree Road, Newport Beach, California 92660, Attn: Investor Relations
or by telephone at +1 415 445-3236.
Tower, Jazz and their
respective executive officers and directors, under SEC rules, may be deemed to
be participants in the solicitation of proxies from the stockholders of Jazz in
connection with the proposed merger.
Investors and security holders may obtain information regarding the
special interests of these executive officers and directors in the proposed
merger by reading the Proxy Statement/Prospectus filed with the SEC when it
becomes available. Additional
information regarding Towers executive officers and directors is included in
Towers Form 20-F for the year ended December 31, 2006, which was
filed with the SEC on June 25, 2007.
Additional
information regarding the executive officers and directors of Jazz is included
in Jazzs Proxy Statement for its 2008 Annual Meeting of Stockholders, which was
filed with the SEC on April 7, 2008.
These
documents are available free of charge at the SECs web site at www.sec.gov and
are also available free of charge from Investor Relations at Tower and Jazz by
contacting Tower and Jazz as described above.
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