OTTAWA, CANADA (NYSE: ZL) received a letter from Mr. Scott
Leckie, an employee of National Bank Financial. National Bank
Financial acquired Mr. Leckie's previous employer, a hedge fund
management company named Aquilon Capital. According to his letter,
Mr. Leckie manages or controls 5.2% of Zarlink's outstanding
shares, on behalf of the hedge fund managed by National Bank
Financial.
In summary, this letter demanded the replacement of five company
directors with five unnamed nominees, and the replacement of the
CEO and Chairman of the Board, in order to give the hedge fund full
control of the board. The letter outlines five areas to support the
request for change, and threatens a proxy fight to attain board
control if Zarlink does not comply. The letter also requested a
meeting to present the proposal to Zarlink's Board of Directors.
However, before the Zarlink Board meeting had concluded, the letter
was issued to media.
"This is a hedge fund that owns just five percent of the Company
seeking an opportunity to generate a short-term gain, without any
regard for the longer-term opportunities for the majority of our
shareholders," said Kirk Mandy, President and CEO, Zarlink
Semiconductor. "We believe Mr. Leckie is intentionally misstating
the financial position of Zarlink, our product strategy and market
realities to further the hedge fund's agenda and destroy one of the
few remaining Canadian-based high tech companies."
Value Enhancement
As Zarlink has openly stated in its quarterly conference calls,
the high-tech sector, and in particular the semiconductor sector,
is currently out of favour with the public markets. This is seen in
the continuing decline in the valuation of all companies in this
sector, including most of Zarlink's peers.
In his letter, Mr. Leckie is prepared to declare the Legerity
acquisition a failure after only 11 months. In fact, sales from the
Legerity portion of our business are helping fuel revenue growth.
Zarlink revenue grew by 13 percent from the third quarter of Fiscal
2008 to the fourth quarter of Fiscal 2008, and is expected to grow
by another 9 to 11 percent in the first quarter of Fiscal 2009. We
foresee strong revenue from Legerity as telephone companies and
cable operators ramp investment in the infrastructure required to
deliver integrated voice, television and Internet services.
The true value of this acquisition will be seen in Fiscal 2009.
As stated in previous conference calls, we have positioned the
company to break-even in the first quarter of Fiscal 2009 and be
profitable for the Fiscal 2009 year.
In his letter, Mr. Leckie also stated that Zarlink was forced to
accept an unfavorable debenture as part of the acquisition of
Legerity. However, National Bank Financial had no issue with
generating significant fees as a 20 percent member of the
underwriting syndicate used for this debenture and recommended the
debenture to its clients. Zarlink is surprised that National Bank
Financial has supported this threatened proxy fight, and finds it
very unprofessional.
Mr. Leckie also mistakenly stated that the Company has continued
to miss sales guidance. This is simply not true. Zarlink has met or
exceeded guidance in 11 of the past 12 quarters.
Product Vision
Mr. Leckie asserted that the Company does not have any
market-leading products. Again, his letter does not accurately
portray Zarlink's product vision. As outlined in our quarterly
conference calls and product press releases, we enjoy
market-leading positions in voice circuits, network timing, medical
telemetry and high-speed optical interconnect.
Focus on Shareholders
Zarlink's management and directors own approximately 2 million
company common shares, most of which were purchased at prices well
above the current trading price. We are shareholders, but are also
focused on building Zarlink for the longer-term. We make the
necessary decisions that may at times impact short-term financial
performance in favour of longer-term growth.
Transparency
Zarlink confirms to all appropriate reporting requirements under
U.S. Generally Accepted Accounting Principles (GAAP) and the
Security Exchange Commission (SEC) Regulation Fair Disclosure (FD).
We hold regular conference calls to update interested parties on
our progress, and all reported information is available in the
public domain. As well, Zarlink maintains a professional investor
relations capability that is always available to provide
information within our abilities while complying with regulation
FD.
Leadership
Zarlink has established a very experienced management team and
Board of Directors. Full biographical information on our management
team and Board of Directors is available on our web site. In his
letter, Mr. Leckie provides no background information of his
proposed board or management nominees.
"This is an attack against the leadership of Zarlink that only
serves to provide National Bank Financial with a short-term gain at
the expense of other shareholders who recognize the longer-term
growth and value opportunity," said Dr. Henry Simon, Chairman of
the Board, Zarlink Semiconductor. "We are confident that our
product investment and strategic focus will drive profitable growth
in Fiscal 2009 and future years."
Shareholders are strongly advised to support the Zarlink
management team's current slate of directors and reject the
self-interested proposal by this five percent hedge fund.
About Zarlink Semiconductor
For over 30 years, Zarlink Semiconductor has delivered
semiconductor solutions that drive the capabilities of voice,
enterprise, broadband and wireless communications. The Company's
success is built on its technology strengths including voice and
data networks, optoelectronics and ultra low-power communications.
For more information, visit www.zarlink.com.
Shareholders and other individuals wishing to receive, free of
charge, copies of the reports filed with the U.S. Securities and
Exchange Commission and Regulatory Authorities, should visit the
Company's web site at www.zarlink.com or contact Investor
Relations.
Certain statements in this press release constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied
by such forward-looking statements. Such risks, uncertainties and
assumptions include, among others, the following: our dependence on
the successful development and market introduction of new products;
our dependence on revenue generation from our legacy products in
order to fund development of our new products; our ability to
successfully integrate Legerity and any businesses acquired in the
future; any potential undisclosed liabilities associated with the
Legerity acquisition; our ability to operate profitably and
generate positive cash flows in the future; our dependence on our
foundry suppliers and third-party subcontractors; order
cancellations and deferrals by our customers; and other factors
referenced in our Annual Report on Form 20-F. Investors are
encouraged to consider the risks detailed in this filing.
Contacts: Zarlink Semiconductor Inc. Ed Goffin 613-270-7112
edward.goffin@zarlink.com
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