Orange County Business Journal

Zarlink Board Urges Shareholders to Reject Microsemi Bid

Jane Yu Thursday, September 1, 2011

Aliso Viejo-based chipmaker Microsemi Corp.’s hostile bid for Zarlink Semiconductor Inc. in Ottawa, Canada, has hit more resistance.

Zarlink directors today urged the company’s shareholders to reject Microsemi’s latest offer, a $548.7 million cash bid made last month.

“The Microsemi offers significantly undervalue Zarlink,” said Adam Chowaniec, Zarlink’s chairman. “They come at an inflection point in Zarlink’s financial, technological and operational repositioning and do not provide our shareholders and debentureholders with the value of our repositioning.”

Microsemi took its bid directly to Zarlink shareholders last month, after the Canadian company’s board rejected several offers.

The latest is a premium of about 40% based on the closing price of Zarlink’s stock the day before the July 20 announcement of the bid. Zarlink’s shares have risen since then, and the offer now is a 7% discount to a closing price of $3.59 for Zarlink shares on Aug. 31.

Zarlink’s directors said the company has received several competing offers from bidders, but did not disclose any suitors.

Zarlink counts on the communications sector for about 80% of its business and the medical sector for most of the rest. Its chips are used by telecommunications and cable companies for bundled voice, video, data and mobile services. Its medical business makes ultra low-power radios for devices such as pacemakers.

Microsemi’s chips serve a variety of military, aerospace, consumer and industrial uses. Its products are built into satellites, digital televisions and other devices. Customers include Cisco Systems Inc., Boeing Co., Hewlett-Packard Co., Dell Inc. and Samsung Electronics Co.

The company now is Orange County’s third-biggest chipmaker by sales and reported about $520 million in revenue for the 12 months through October.

Microsemi is a frequent acquirer, and buys are key to the company’s current goal of doubling revenue. It typically buys several companies a year as part of a rollup strategy in what are known as high-reliability chips used in devices where failure is costly.