Note 2 - Acquisition and Divestiture Activities

As part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product quality and reliability, and product lines with which the Company has substantial marketing and technical expertise.

Year ended December 31, 2014

Holy Stone Polytech Co., Ltd.

On June 11, 2014, Vishay acquired Holy Stone Polytech Co., Ltd. ("Holy Stone Polytech"), a Japanese manufacturer of tantalum capacitors and formerly a subsidiary of Holy Stone Enterprise Co. Ltd., for $20,576, net of cash acquired. The acquisition is expected to strengthen the Company's position in tantalum capacitors, especially in Asia. For financial reporting purposes, the results of operations of Holy Stone Polytech have been included in the Capacitors segment since June 11, 2014. The inclusion of this business did not have a material impact on the Company's consolidated results for the year ended December 31, 2014. Based on an estimate of their fair values, the Company allocated $3,736 of the purchase price to definite-lived intangible assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $6,328 related to this acquisition. The goodwill associated with this transaction is not deductible for income tax purposes. The Company will test the goodwill for impairment at least annually in accordance with GAAP.

Capella Microsystems Inc.

On July 11, 2014, Vishay entered into an agreement to acquire Capella for approximately $205,000. Capella is a fabless IC design company specializing in optoelectronic products. As a first step in the acquisition, Vishay launched a tender offer for Capella's outstanding shares. A total of 38,703,705 shares of Capella, or 88.95% of outstanding shares, were tendered and accepted by Vishay. The offer period expired on September 1, 2014. Pursuant to the terms of the tender offer, Vishay paid NT$139 for each share tendered. The aggregate purchase price was $180,167. Capella had cash and short-term investments on hand of $50,195 at the date of acquisition. Vishay funded the acquisition with cash on hand and $53,000 of borrowings under its credit facility. Subsequent to the acquisition of the noncontrolling interest on December 31, 2014, the Company expects to repatriate cash from the current earnings of non-U.S. subsidiaries to the United States primarily to repay those borrowings on the revolving credit facility, and also to realign the acquired entity structure to have Capella's U.S. subsidiary directly owned by Vishay Intertechnology, Inc. The acquisition is expected to strengthen the Company's position in optoelectronic sensors.

Upon the close of the tender offer, Vishay controlled Capella and began consolidating it in its financial statements. For financial reporting purposes, the results and operations and net assets of Capella have been included in the Optoelectronic Components segment. The interest represented by the shares not tendered are presented as noncontrolling interests in the consolidated financial statements. The fair value of the noncontrolling interest was determined based on the observable quoted share price as of the acquisition date. Capella's results were not material to the Company's consolidated results for the year ended December 31, 2014.

Vishay acquired the remaining outstanding shares of Capella on December 31, 2014 pursuant to the merger agreement. In connection with the closing of the merger, all remaining holders of Capella common stock other than Vishay and its subsidiaries received the same consideration for their shares as the holders who tendered their shares in the tender offer, or $21,067 in the aggregate.

Based on an estimate of their fair values, the Company allocated the purchase price of the acquisition as follows:

Short-term investments	$	47,438
Working capital (excluding cash and short-term investments)		(6,374	)
Property and equipment		4,134
Intangible assets:
Patents and acquired technology		14,870
Capitalized software		101
Customer relationships		54,400
Tradenames		5,110
Total intangible assets		74,481
Other, net		(454	)
Deferred taxes, net		(16,769	)
Total identified assets and liabilities		102,456

Cash paid to Capella stockholders, net of cash acquired		177,410
Fair value of noncontrolling interest		21,895

Goodwill	$	96,849

Note 2 - Acquisition and Divestiture Activities (continued)

The weighted average useful lives for patents and acquired technology, customer relationships, and tradenames are 10, 7, and 7 years, respectively. The Company will test the goodwill for impairment at least annually in accordance with GAAP. The goodwill associated with this transaction is not deductible for income tax purposes.

In evaluating the acquisition of Capella, the Company focused primarily on the ability to synergize Capella's optoelectronics design capabilities with Vishay's existing optoelectronics product lines and customers. As a result, the fair value of the acquired assets, including identified intangible assets, corresponds to a relatively smaller portion of the acquisition price, with the Company recording a substantial amount of goodwill associated with the acquisition.

The Company recognized $843 of acquisition costs classified as a component of selling, general, and administrative expenses in its consolidated statements of operations.

Pro Forma Results

The unaudited pro forma results would have been as follows, assuming the 2014 acquisitions had occurred as of January 1, 2013:

	Years ended December 31,
	2014		2013

Pro forma net revenues	$	2,522,010	$	2,446,503
Pro forma net earnings attributable to Vishay stockholders		114,510		128,252
Pro forma basic earnings per share attributable to Vishay stockholders	$	0.78	$	0.88
Pro forma diluted earnings per share attributable to Vishay stockholders	$	0.75	$	0.85

The pro forma information presented for the year ended December 31, 2014 was adjusted to exclude acquisition-related costs incurred in 2014. The pro forma information also includes adjustments for interest expense that would have been incurred to finance the acquisition, amortization of acquired intangible assets, depreciation of acquired property and equipment, and tax related effects.

The unaudited pro forma results are not necessarily indicative of the results that would have been attained had the acquisition occurred on January 1, 2013.

Year ended December 31, 2013

MCB Industrie S.A.

On June 13, 2013, Vishay acquired MCB Industrie S.A. ("MCB Industrie") in France, a well-established manufacturer of specialty resistors and sensors, for $23,034, net of cash acquired. The products and technology portfolio acquired is expected to enable Vishay to expand its presence in the European industrial market. For financial reporting purposes, the results of operations for this business have been included in the Resistors & Inductors segment from June 13, 2013. The inclusion of this business did not have a material impact on the Company's consolidated results for the year ended December 31, 2013. Based on an estimate of their fair values, the Company allocated $5,433 of the purchase price to definite-lived intangible assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $7,985 related to this acquisition. The goodwill associated with this transaction is not deductible for income tax purposes.

Had this acquisition occurred as of the beginning of the periods presented in these consolidated financial statements, the pro forma statements of operations would not be materially different than the consolidated statements of operations presented.

Year ended December 31, 2012

HiRel Systems LLC

On January 13, 2012, Vishay acquired HiRel Systems LLC, a leading supplier of high reliability transformers, inductors, coils, and power conversion products, for $85,493, net of cash acquired. The products and technology portfolio acquired further enhanced the Company's inductors portfolio, particularly in the field of custom magnetics for medical, military, aerospace and aviation, and applications in the industrial and commercial field such as renewable energy and test and measurement equipment. For financial reporting purposes, the results of operations for this business have been included in the Resistors & Inductors segment from January 13, 2012. Based on an estimate of their fair values, the Company allocated $43,950 of the purchase price to definite-lived intangible assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $25,815 related to this acquisition. The goodwill associated with this transaction is deductible for income tax purposes.