Notable Mergers and Acquisitions of the Day 12/28: TOBC/FCEC, ONNN/CAMD, AMCS, DSCM

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Tower Bancorp, Inc. (NASDAQ: TOBC) and First Chester County Corporation (NASDAQ: FCEC) today jointly announced the signing of a definitive merger agreement pursuant to which Tower will acquire First Chester in an all-stock transaction valued at approximately $65 million or $10.22 per share.

The transaction, approved by the boards of directors of both companies, further broadens the geographic markets of Tower Bancorp into demographically attractive and contiguous markets predominantly located in the Pennsylvania counties of Chester and Delaware. This transaction will provide Tower with the addition of $1.3 billion in assets including, $958 million in gross loans held for investment, $986 million in deposits as well as 23 branches situated across four counties in southeastern Pennsylvania.

“This acquisition is a continuation of our strategy to expand selectively our geographic footprint in contiguous markets with long-term growth potential,” said Tower Chairman and Chief Executive Officer Andrew S. Samuel. “Upon closing we will be one of central and southeastern Pennsylvania’s largest independent community banks. Moreover, First Chester customers and the local community will benefit from the continued presence and engagement of a locally managed bank.”

Under the terms of the agreement, each First Chester shareholder will receive 0.453 shares of Tower common stock for each First Chester share. The market value as of December 24, 2009 of $10.22 per First Chester share represents 90% of the company’s tangible book value. As described in the definitive merger agreement, the exchange ratio is subject to upward or downward adjustment if loan delinquencies at First Chester increase or decrease beyond specified amounts.

“We believe this transaction will create significant value for First Chester shareholders, both immediately and longer term,” said John A. Featherman III, current Chairman, President and Chief Executive Officer of First Chester. “In addition, both institutions share a similar culture and have a strong commitment to their respective communities.”

Management anticipates that there will be no branch closures. Tower expects to achieve 15% cost savings, or approximately $12 million, through the reduction of administrative and operational redundancies. Additionally, Tower expects that this acquisition will immediately be significantly accretive to earnings per share.

As part of the definitive agreement, Tower’s subsidiary bank, Graystone Tower Bank, has agreed to increase its lending facility with First Chester to up to $26 million as well as to purchase up to $100 million of residential mortgage and commercial loans from First National Bank of Chester County in order for the bank to satisfy the regulatory capital requirements of the Office of the Comptroller of the Currency (the “OCC”).

Upon closing of the First Chester acquisition, on a pro forma basis, Tower will continue to maintain regulatory capital ratios in excess of the “well-capitalized” level. Neither Tower nor First Chester elected to receive funds under the US Treasury’s Capital Purchase Program. In order to maintain Tower’s well-capitalized position, the merger agreement provides specific protections in the event of an increase in First Chester’s loan delinquencies prior to closing.

It is anticipated that the transaction will be completed during the second quarter of 2010, pending regulatory approvals, the approval of the shareholders of both Tower and First Chester, and the satisfaction of other closing conditions.
ON Semiconductor (NASDAQ: ONNN) today announced that it has commenced its tender offer for the acquisition of California Micro Devices Corporation (NASDAQ: CAMD).

This move represents the next step toward an acquisition first announced on December 14. As previously reported: "The acquisition of California Micro Devices will significantly strengthen our offering of application specific integrated passive devices to protect products in the wireless, computing and consumer electronics end-markets," said Keith Jackson, ON Semiconductor president and CEO. "In addition, CMD's expertise in protection solutions for the high brightness LED market, as well as their strengths in LC-based EMI (electromagnetic interference) filtering and low capacitance ESD (electrostatic discharge) protection, complement our existing portfolio of protection and lighting solutions. With technology and process development expertise in ESD and EMI protection, CMD is highly differentiated in the marketplace - as demonstrated by their strong relationships with leading global customers across multiple large and growing applications. Combined with ON Semiconductor's global sales channel footprint and effective channels of distribution, we expect to be able to support a broader and deeper penetration of CMD's overall product portfolio with market-leading customers. This should enable us to accelerate revenue growth for CMD's products and increase market share. We also believe CMD's products and operations will benefit from ON Semiconductor's world-class manufacturing capabilities."

The cash tender, through PAC-10 Acquisition Corporation, an indirect, wholly-owned ON Semiconductor subsidiary, is for all outstanding shares of CMD common stock at a price of $4.70 per share, without interest and less any applicable withholding or stock-transfer taxes.
AMICAS, Inc. (NASDAQ: AMCS) today announced that on December 24, 2009, it entered into a definitive merger agreement to be acquired by an affiliate of Thoma Bravo, LLC, in a transaction valued at approximately $217 million. The AMICAS Board of Directors unanimously approved the agreement and resolved to recommend that the shareholders of AMICAS adopt the agreement.

Under the terms of the agreement, AMICAS shareholders will receive $5.35 in cash for each share of AMICAS common stock they hold, representing a premium of approximately 24 percent over AMICAS' average closing share price during the 30 trading days ending December 24, 2009, and a 38 percent premium over AMICAS' average closing share price during the 90 trading days ending December 24, 2009.

The transaction is subject to customary closing conditions, including requisite regulatory approvals and approval of AMICAS shareholders. The transaction is not subject to a financing condition. AMICAS expects the transaction to close in the first quarter of 2010.

Under the merger agreement, there is a provision whereby AMICAS may solicit alternative proposals from third parties during the 45 calendar days commencing December 24, 2009. There can be no assurance that an alternative transaction will emerge. For further information regarding all terms and conditions contained in the definitive merger agreement, please see our Current Report on Form 8-K, which will be filed in connection with this transaction.

Raymond James & Associates, Inc. is serving as financial advisor to AMICAS. Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, P.C. is serving as legal counsel to AMICAS, and Thoma Bravo's legal counsel is Kirkland & Ellis, LLP.
drugstore.com, inc. (NASDAQ: DSCM) has entered into an agreement to acquire Salu, Inc. in a stock and cash transaction. Salu owns and operates the SkinStore.com webstore, an online retailer of clinical skin care and beauty products. Additionally, Salu has distribution capabilities in Australia and operates the spalook.com(TM) webstore for Sandow Media, parent company of NewBeauty Magazine. In 2009, Salu is expected to generate at least $40 million of revenue, $500,000 of net income and $1.4 million of adjusted EBITDA, excluding one-time transaction-related charges.

Under the terms of the agreement, the transaction is valued at $36 million payable half in cash and half in drugstore.com common stock, plus an opportunity for senior management of Salu to receive an additional amount based on achievement of certain performance targets and integration milestones.

The acquisition is expected to be accretive to drugstore.com, inc. earnings per share in 2010, excluding one-time transaction fees and integration costs. drugstore.com, inc. expects to record approximately $2.4 million to $2.9 million of transaction and integration related expenses in fiscal year 2010. The transaction is expected to close in the first quarter of fiscal 2010.