Hedge fund demands Cypress split out SunPower

A letter over the holidays by a prominent investor in Cypress Semiconductor (NYSE: CY) has renewed a call for the company to split out SunPower (NASDAQ: SNPR) and go private.

Robert L. Chapman, Jr. of Chapman Capital, formerly of Goldman Sachs, wrote Cypress' Board of Directors urging Cypress to reorganize via a split-off and go private via a subsequent LBO transaction.

"Like other significant owners of Cypress Semiconductor, Chapman Capital has recommended that its Board of Directors re-engage Credit Suisse to effect a corporate reorganization that separates Cypress's core semiconductor operations from its controlling stake in SunPower," wrote Chapman.

This fall, Cypress retained Credit Suisse to investigate strategic alternatives for the company and its investment in SunPower, included a possible buyout. On October 19th, Cypress issued a statement that it intended to continue with its standalone strategy, as it was "in the best interests of its stockholders."

Chapman believes Credit Suisse valued Cypress' core business at $1.8 - $2.0 billion, supported by $175-200 million in estimated 2007 EBITDA.

SunPower declined to comment on the Chapman letter, but Cypress Semiconductor VP Corporate Communications Joe McCarthy confirmed to the Cleantech Group that while the company still adheres to its position issued October 19th, "it continues to look at some options looking forward."

The letter gets personal, calling into question the abilities of Cypress founder and CEO Thurman J. ("TJ") Rodgers, citing "a history of false starts", and suggesting that investors appear "unwilling to believe that Mr. Rodgers finally is going to deliver long term, permanent shareholder value for the Cypress Core business that [he] founded in 1982."

Chapman argues further that "Mr. Rodgers refuses to separate SunPower from Cypress Core because such reorganization could remove from Cypress the only growth vehicle capable of vindicating his career oversight of Cypress, once and for all, as Mr. Rodgers moves into the late stages of his forty year career."

The New York Times has called Robert Chapman the unofficial poet laureate of the 13D letter, calling his public missives to corporations, in which he often demands that they change their ways or else, "the stuff of legend for their opprobrious — often contumelious — tone." [ed.: don't worry, we didn't know what they meant, either.]

Chapman Capital notes it has "agitated successfully for the restructuring or sale of over twenty publicly-traded companies" in the last 10 years.

Cypress is currently trading at $16.87 a share, up 3.12% today, but down substantially from its high in the fall of $19.86. Shares of SunPower are up 2.23% to $37.17.