Paragraph 3 and 6 are extremely interesting :) (despite the behind the scenes bids, it wasn't until the hostile $3.35 bid that it was made public -stock gapped) also look who is in paragraph 11, great read!
Zarlink Semiconductor shares soared 50 per cent in heavy trading on Wednesday after U.S. chip maker Microsemi Corp. announced a US$548.7-million hostile takeover bid for the Ottawa-based company.
Zarlink's board of directors said after the markets closed that Microsemi's offer of C$3.35 per share is too low and undervalues the company's future value. Investors appeared to come to the same conclusion, pushing up Zarlink's shares to $3.60 on the Toronto Stock Exchange at the end of trading Wednesday.
Earlier in the day, Microsemi chief executive James Peterson called on Zarlink's shareholders to support the takeover offer. He said Zarlink's shareholders hadn't been well served by the board's refusal to consider previous offers to the directors.
"We are committed to this transaction and are prepared to take the necessary actions," Peterson told a conference call with analysts Wednesday.
"We're disappointed at Zarlink's continued refusal to review the merits of this proposed combination, not only for the shareholders of Microsemi but certainly for the shareholders of Zarlink, whose interests are not being served by the board and the management team."
Microsemi (NASDAQ:MSCC), headquartered in Irvine, Calif., said it has tried to launch private talks with Zarlink executives several times, including two written proposals, and all were rejected without discussion.
Zarlink's board of directors later responded with an explanation for their snub.
The latest proposal is valued at $3.35 per share in cash, which is a 40 per cent premium above the closing price of Zarlink's shares on Tuesday. After the announcement, Zarlink (TSX:ZL) was by far the most active issue on the Toronto Stock Exchange with more than 26 million shares traded.
Zarlink said its board and its financial advisers had carefully reviewed Microsemi's previous offers — C$3 on May 20 and C$3.25 on June 17 — and unanimously concluded they significantly undervalued Zarlink and its future prospects. The company said Microsemi's latest offer doesn't change the board's position.
"The Zarlink board has always been prepared to consider and pursue strategic transactions or plans and will consider all appropriate alternatives which capture the true value of the Company for its stakeholders" said Adam Chowaniec, chairman of Zarlink's board of directors.
"Zarlink continues to make strong progress as it focuses on growth opportunities in the communication and medical markets," he added. "Microsemi's proposal clearly does not capture the value that has been created or that exists in the company."
An analyst who asked to remain anonymous said the stock market activity indicates the $3.35 bid won't succeed.
"The way I would look at it is that it's reasonable to think that other bidders would be attracted to Zarlink," the analyst said.
Other bidders could possibly include chip maker Intel Corp. and United Kingdom-based semiconductor company IDT, the analyst said.
Zarlink's telecom chips are used by equipment makers such as Huwei, Alcatel-Lucent and Cisco for voice and data networks. It Zarlink also provides low-power radio chips for medical implant devices such as pacemakers and defibrillators that give the devices wireless capabilities that help better monitor patients.
St. Jude, the second-biggest pacemaker company in the world, uses Zarlink's technology in their pacemakers, the analyst said, and medical technology company Medtronic has announced it will also use Zarlink chips.
"I think the medical business is what's attracting the company," he said of Microsemi's takeover bid.
Zarlink has been in the midst of cutting costs as it works to improve its earnings. In May, Zarlink announced that it would cut five per cent of its 550-member workforce, with some of the jobs being redeployed to other areas to boost revenue growth.
Microsemi has semiconductor products for aerospace, defence and security as well as business, industrial and alternative energy markets and has more than 2,800 employees globally.
Microsemi shares closed at US$19.92 on the Nasdaq market, down two cents with under one million shares traded Wednesday.