Orthofix shareholders urged to reject Ramius proposals

By Lisa Kerner

Charlotte, N.C., March 19 - Proxy Governance, Inc. recommended that Orthofix International NV shareholders reject each of the proposals put forth by Ramius LLC at the special meeting on April 2, Orthofix announced on Thursday.

Orthofix was forced to schedule a special meeting of shareholders after Ramius delivered shares representing about 55% of the company's outstanding stock in support of such a meeting for the purpose of making changes to the board.

According to Orthofix, the proxy advisory firm's report said "The problem with the dissident campaign is not an inability to evaluate what went wrong, but the profound absence of a plan to effect a credible recovery."

Orthofix said Proxy Governance reported that the company's board and management "have articulated a clear plan for recovery, with milestones and key metrics along the way, and appear to be tightly focused on execution."

Shareholder disagrees

Ramius said the Proxy Governance report shows that Orthofix's board has overseen "the massive destruction of shareholder value."

"Their report states, 'There is no question the company's post [Blackstone]-merger execution went utterly off the tracks, or that it has substantially eroded shareholder value, at least as measured by the three-year share price decline of more than 70%," said Ramius partner Jeffrey C. Smith.

Blackstone Medical was acquired in 2006.

"Prior to the acquisition of Blackstone, Orthofix was a healthy and debt-free company that had reasonable growth, strong profits and substantial free cash flow," Smith said.

Ramius denied it was seeking control of the company and said it believes Orthofix needs a reconstituted board to consider alternatives to protect and maximize shareholder value.

Company fires back

On Thursday, Orthofix accused Ramius of misleading shareholders in recent communications, including filings with the Securities and Exchange Commission, as part of the ongoing proxy contest.

Specifically, Orthofix said Ramius falsely:

• Linked chairman James Gero with the sharp price decline of Clearwater, Inc.;

• Stated that Orthofix board member Thomas J. Kester has no public or private board experience;

• Stated the company's office location is among the most expensive real estate in Boston; and

• Accused Orthofix of scheduling the special meeting as late as possible under Netherlands Antilles law.

As previously reported, Orthofix believes Ramius "exhibited poor judgment in the nomination of unqualified and problematic individuals" for election to the company's board.

Orthofix, a Curacao, the Netherlands Antilles-based diversified orthopedic products company, had previously questioned the qualifications of Ramius nominees Steven Lee and Peter A. Feld.

Ramius also nominated J. Michael Egan and Charles T. Orsatti for election to the Orthofix board in its bid to replace Gero, Peter Hewet, Alan Milinazzo and Walter P. von Wartburg.

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