1999-05-03 ,
News Flash

Royal Philips Electronics and VLSI Technology, Inc. today announced they have signed a definitive merger agreement under which Philips will acquire all VLSI shares for $21.00 per share in cash. VLSI will become a key part of Philips Semiconductors, a $4.5 billion division of Royal Philips Electronics that is one of the world's leading global suppliers of communications and consumer semiconductor products.

VLSI currently has approximately 46.6 million shares outstanding, of which Philips already owns 1.2 million shares. Philips will also cash out options on an additional 11.3 million VLSI shares.

Philips will today amend its existing tender offer to purchase all of the outstanding shares of VLSI common stock to increase the purchase price to $21 per VLSI share and to extend the expiration date of the offer to midnight, New York City time, on Friday, May 14, 1999, unless further extended. The tender offer was previously scheduled to expire on May 10, 1999. To date, approximately 237,316 VLSI shares have been validly tendered and not withdrawn pursuant to Philips' tender offer. Philips expects to mail amended tender offer materials to VLSI stockholders in the next several days.

VLSI's Board of Directors has voted unanimously to approve the definitive merger agreement, and to recommend that VLSI stockholders accept Philips' amended cash tender offer.

Arthur van der Poel, chairman of Philips Semiconductors said, "We are pleased to have been able to work out a negotiated transaction with VLSI at a price that is fair to the shareholders of both companies. After reviewing non-public VLSI information and meeting with VLSI management, we have concluded there is additional value in the company. VLSI has exactly the technology, know-how and people in place to help further the strategy of Philips Semiconductors. Now that we have concluded the agreement in this way, we can focus on getting to know the VLSI employees who we recognize as one of the company's key assets, and move forward together."

VLSI and Philips Semiconductors have complementary operations with almost no product overlap. Combining VLSI's digital expertise and capabilities in wireless communications, computer networking and ASICs with Philips' strengths in wireless, multimedia, automotive and consumer electronics will benefit the customers of both companies and create numerous growth opportunities.

Alfred J. Stein, chairman and chief executive officer of VLSI, said: "We are very pleased that the strategic review process in which we have been engaged has resulted in an agreement that is good for our customers, good for our business partners, good for our employees, and, above all, good for our stockholders. VLSI is one of the leading designers and manufacturers of leading-edge semiconductor products. Philips is one of the world's leading consumer electronics companies. Together, we can accomplish far more for the benefit of our constituents than either company could do as standalone entities. I look forward to working closely with Philips to complete the transaction and to achieve a smooth and seamless transition."

Credit Suisse First Boston Corporation served as financial advisor to Philips and Morgan Stanley & Co. Incorporated and Hambrecht & Quist LLC served as financial advisors to VLSI with respect to the Philips tender offer and the evaluation of strategic alternatives to such offer.

VLSI stockholders with questions about Philips' tender offer can call Philips' Information Agent for the offer, Innisfree M&A Incorporated, at +1 888 848-4543 or +1 212 750-5833 (collect), or VLSI's Information Agent, MacKenzie Partners at +1 800 322-2885 or +1 212 929-5500 (collect).

For further information:
Philips Media Relations
Jeremy Cohen, tel. +31 20 5977213

VLSI
Lisa Ewbank, +1 408 4745519
Todd Fogarty (Media) Kekst and Company 212 5214854