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EXHIBIT 7
Board of Directors
DSP Communications, Inc.
October 13, 1999
Page 1
October 13, 1999
Board of Directors
DSP Communications, Inc.
20300 Stevens Creek Boulevard
Cupertino, California 95014
Members of the Board of Directors:
DSP Communications, Inc. (the "Company"), Intel Corporation (the
"Acquiror") and CWC Acquisition Corporation, a wholly owned subsidiary of the
Acquiror (the "Acquisition Sub"), propose to enter into an Agreement and Plan of
Merger dated as of October 13, 1999 (the "Agreement") pursuant to which
Acquisition Sub will conduct a tender offer (the "Offer") for any and all
outstanding shares of the Company's common stock, par value $0.001 per share
(the "Shares"), at $36 per Share, net to the seller in cash. The Agreement also
provides that, following consummation of the Offer, Acquisition Sub will be
merged with the Company in a transaction (the "Merger") in which each
outstanding Share which is not acquired in the Offer (other than dissenting
shares, treasury shares, Shares held by any of the Company's subsidiaries, and
Shares held by Acquiror, Acquisition Sub or any other subsidiary of Acquiror)
will be converted into the right to receive $36 in cash. In connection with the
Offer and the Merger, the parties also propose to enter into an agreement (the
"Option Agreement") pursuant to which the Company will grant to the Acquiror an
option to acquire a number of newly issued Shares equal to approximately 19.9%
of the total Shares outstanding as of the date of the Agreement.
You have asked us whether, in our opinion, the proposed cash
consideration to be received by the holders of the Shares, other than the
Acquiror and its affiliates, in the Offer and the Merger is fair to such
stockholders from a financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
(1) reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the four fiscal years ended December
31, 1998 and the Company's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31,
1999 and June 30, 1999;
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Board of Directors
DSP Communications, Inc.
October 13, 1999
Page 2
(2) reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the Company, furnished to us by the Company;
(3) conducted discussions with members of senior management of the
Company concerning its businesses and prospects;
(4) reviewed the historical market prices and trading activity for
the Shares and compared them with the historical market prices
and trading activity of certain publicly traded companies which
we deemed to be reasonably similar to the Company;
(5) compared the results of operations of the Company with the
results of operations of certain companies which we deemed to be
reasonably similar to the Company;
(6) compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of
certain other mergers and acquisitions which we deemed to be
relevant;
(7) reviewed a draft of the Agreement, received on October 13, 1999;
(8) reviewed a draft of the Option Agreement, received on October
13, 1999; and
(9) reviewed such other financial studies and analyses and performed
such other investigations and took into account such other
matters as we deemed necessary, including equity analysts'
forecasts with respect to the Company's future performance and
our assessment of general economic, market and monetary
conditions.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company, and we have not independently verified such information or
undertaken an independent appraisal of the assets of the Company. With respect
to the financial forecasts furnished by the Company, we have assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's management as to the expected future financial
performance of the Company. We have also assumed that the final forms of the
Agreement and the Option Agreement will be substantially similar to the last
drafts reviewed by us. Our opinion is necessarily based upon market, economic
and other conditions as they exist and can be evaluated on, and on the
information made available to us as of, the date hereof.
We are acting as financial advisor to the Company in connection with
the transactions contemplated by the Agreement and will receive from the Company
for our services (i) a fee payable upon the earlier of public announcement of
the Offer or execution of a definitive agreement with respect to the Offer and
(ii) an additional fee contingent upon completion of the Offer. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of our
engagement. We have, in the past, provided financial advisory and financing
services to the Company and financial advisory
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Board of Directors
DSP Communications, Inc.
October 13, 1999
Page 3
services to the Company's current chairman and chief executive officer and have
received fees for the rendering of such services. In addition, in the ordinary
course of our business we may actively trade Shares and other securities of the
Company and securities of the Acquiror for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
securities of the Company and Acquiror. We also issue research reports on both
the Company and Acquiror and from time to time present potential transactions
to, and solicit engagements from, the Company and Acquiror.
This opinion is for the use and benefit of the Board of Directors of
the Company. Our opinion does not address the merits of the underlying decision
by the Company to engage in the transactions contemplated by the Agreement and
does not constitute a recommendation to any holder of Shares as to whether to
tender such Shares in the Offer or as to how such holder should vote on the
Merger or any matter related thereto.
On the basis of, and subject to the foregoing, we are of the opinion
that, as of the date hereof, the proposed cash consideration to be received by
the holders of the Shares, other than the Acquiror and its affiliates, pursuant
to the Offer and the Merger is fair to such stockholders from a financial point
of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Emiko Higashi
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Managing Director
Investment Banking Group