EZchip Semiconductor (EZCH) Commences 3.86M Common Offering

EZchip Semiconductor Ltd. (NASDAQ: EZCH), a provider of network processors, today announced that it commenced a public offering of 3,863,050 of its ordinary shares. Of such shares, 712,618 ordinary shares are being offered by EZchip and 3,150,432 ordinary shares are being offered by the "Selling Shareholders", which consists of funds affiliated with Goldman, Sachs & Co. and JK&B Capital. In addition, Jefferies & Company, Inc., the exclusive underwriter for the offering, will also have an option to purchase from the Selling Shareholders and EZchip up to an additional 15% of the total offered shares to cover over-allotments, if any, within 30 days at the public offering price, less underwriting discounts and commissions.

Following the completion of the offering and assuming Jefferies exercises its over-allotment in full, the Selling Shareholders will have sold all their shares of EZchip. EZchip will not receive any proceeds from the sale of the ordinary shares by the Selling Shareholders.

In connection with the consummation of the offering, EZchip also intends to complete an employee exchange offer pursuant to which its current and former employees will exchange their shares and options of EZchip's majority-owned subsidiary, EZchip Technologies Ltd., for ordinary shares and options of EZchip and for cash.

EZchip intends to use all of its net proceeds from the offering to purchase from the employees for cash a portion of their exchanged EZchip Technologies securities to enable them to fund their tax obligation as a result of the employee exchange offer.

Following the completion of the offering and the employee exchange offer, EZchip expects to increase its ownership interest in EZchip Technologies from approximately 99% (and 90% on a fully diluted basis) to 100% on an outstanding basis (and 99.9% on a fully diluted basis). The dilution of each of EZchip's shareholder's percentage of ownership as a result of the employee exchange offer will be substantially offset by the increase in EZchip's holdings in EZchip Technologies to 100%.