Zarlink board officially snubs Microsemi offer

A game of chicken involving the bid for Canada’s Zarkink Semiconductor Inc. continues after the board rejected the formal takeover offer from a U.S.-based competitor.

The Ottawa fabless semiconductor designer said Thursday that Microsemi Corp.’s offer to pay $3.35 a share and buy all debentures due Sept. 30 “significantly undervalue Zarlink, are highly opportunistic as they come at an inflection point in Zarlink’s financial, technological and operational repositioning and do not provide our shareholders and debenture holders with the value of our repositioning.”

It also notes Microsemi once said it was willing to pay up to $3.55 a share.

In a press release the board said it is “actively pursuing” talks with others to get a better offer.For these reasons it again urged shareholders not to tender their shares to Microsemi.

It’s the third time the board has spurned the offer from California-based Microsemi.

In reply, Microsemi issued a press release saying “there is nothing in Zarlink’s circular that would lead us to conclude there is additional value in the company that was not understood by us, or the market, prior to our bid. The board has again failed to provide its shareholders with a compelling reason to reject Microsemi’s attractive all cash offer.”

Zarlink designs integrated circuits and software used by leading switch and router manufactures, as well as for implanted wireless medical devices.

In the Microsemi release, CEO James Peterson repeated many of the arguments the company has made on how it values Zarlink stock, suggesting he won’t up his bid.

“Since we made our first public proposal on July 20, the global equity markets have experienced significant volatility, with wild gyrations driving the Philadelphia Stock Exchange Semiconductor Index down by 10 per cent,” he said in the release.

“This environment only serves to reinforce the attractiveness of our offer which delivers immediate liquidity, certainty and a 40 per cent premium to the pre-bid value of Zarlink’s shares. The offer of CAD $3.35 per share is firm, and despite what Zarlink suggests, our financing commitment is firmly in place, unaffected by recent market volatility.”

In the release he complained that Zarlink’s board “has still not disclosed any alternative to our cash offer.

In light of the market’s volatility, he added, Zarlink’s shareholders should tender their shares before the offer expires Sept. 22.

In a director’s circular sent to regulators and shareholders, Zarlink says Microsemi’s offer fails to reflect the Canadian company’s prospects for growth in areas such as timing and sychronization chips for wireless backhaul and optical network equipment, and wireless solutions for medical devices.

It alleges the Microsemi offers are designed to capture value for the California company and not for Zarlink shareholders and debenture holders. It also notes the official offers came during the summer to minimize the likelihood of Zarlink getting “superior competing bids.”

Still, “Zarlink has initiated contact with, and been approached by, third parties who have expressed an interest in exploring a transaction with the company to acquire either all or certain significant parts of the Company’s business,” the release says. Fifteen parties that have signed non-disclosure agreements “are in various stages of advancement,” it adds.

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