Microsemi subsidiary 0916753 B.C. makes offer for Zarlink debentures

By Toni Weeks

San Diego, Aug. 17 - Microsemi Corp. announced that its wholly owned subsidiary, 0916753 B.C., has begun offers to acquire all of Zarlink Semiconductor Inc.'s outstanding 6% unsecured subordinated convertible debentures due Sept. 30, 2012.

According to a press release, 0916753 B.C. has also offered to acquire all of the outstanding common shares, together with associated rights, under the shareholder rights plan of Zarlink.

Under the offers, debenture holders of Zarlink will receive C$1,367.35 per C$1,000 principal amount of convertibles that are validly deposited plus accrued interest. In addition, shareholders of Zarlink will receive C$3.35 for each common share validly deposited.

The offers represent a 24% premium over the closing price of the debentures of Zarlink on the Toronto Stock Exchange on July 19 and a 40% premium over the closing price of Zarlink's common shares on the same day.

"We are committed to building and strengthening Zarlink's business and believe our offers provide a superior outcome for Zarlink's shareholders, debentureholders, employees, customers and the local economy," Microsemi president and chief executive officer James J. Peterson said in the release.

"We are disappointed by Zarlink's board of directors' insistence on placing onerous restrictions on Microsemi that would have prevented us from presenting our attractive offers to Zarlink's shareholders and debenture holders," he added. "Under these circumstances, and in the absence of a more attractive alternative, Microsemi is compelled to take its offer directly to shareholders. Zarlink shareholders will receive a substantial premium, in cash, and without execution or macroeconomic risk."

The offers expire on 5 p.m. ET on Sept. 22 unless extended or withdrawn. The offers will be subject to certain conditions, including a validly deposited number of common shares into which the debentures that are deposited and not withdrawn at the expiration of the offers can be converted into and Zarlink's board of directors waiving the application of a shareholder rights plan.

Zarlink's response

Zarlink said in a press release that it has acknowledged the offers but advises debenture holders and shareholders not to take any action until further notice from the Zarlink board, which will be issuing a directors' circular containing its recommendation as to action that should be taken in response to the offers.

The release noted that Zarlink rejected Microsemi's public non-binding proposal to acquire all of the outstanding shares of Zarlink at C$3.35 apiece as "financially inadequate and opportunistic" and that the price "significantly undervalued" Zarlink and its future prospects.

Zarlink clarified that it was Microsemi who, despite several invitations, declined to participate in Zarlink's strategic review process on reasonable terms that would favor the best outcome for Zarlink and its stakeholders.

The Zarlink board has deferred the separation time that would otherwise have occurred as a consequence of the Microsemi offers until a later date to be determined by the board. The rights will not be exercisable, nor will certificates representing the rights be issued, unless the separation time occurs. In spite of the deferral of the separation time, the shareholder rights plan remains in full force and effect, Zarlink said.

Microsemi has retained Stifel Nicolaus Weisel and Morgan Stanley & Co. LLC as its financial advisers and O'Melveny & Myers LLP and Stikeman Elliott LLP as legal counsel.

Investors may request information from Lauren Hill Advisory Group, the information agent for the offers (877 452-7184).

Microsemi is an Aliso Viejo, Calif., provider of semiconductor solutions for the aerospace, defense and security, enterprise and communications, industrial and alternative energy markets. Zarlink provides mixed-signal chip technologies for a broad range of communication and medical applications and is based on Ottawa.

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