Microsemi to Acquire Zarlink

September 21, 2011 by Jeff Shepard

Microsemi Corp. and Zarlink Semiconductor Inc. announced that they have entered into a Support Agreement pursuant to which Microsemi, through a wholly-owned subsidiary (the Offeror), will amend its existing offers to increase the price offered for all of the issued and outstanding common shares (the Shares) and 6% unsecured, subordinated convertible debentures maturing September 30, 2012 (the Debentures) of Zarlink by 19% to CAD$3.98 in cash per Share and CAD$1,624.49 in cash per CAD$1,000 principal amount of Debentures plus accrued and unpaid interest to the date Debentures are taken up (the Amended Offers).

The Board of Directors of Zarlink, after receiving fairness opinions from its financial advisors, RBC Capital Markets and Canaccord Genuity Corp, has unanimously determined that the Offers are fair to its Shareholders and Debentureholders, that it is in the best interests of the Company to support and facilitate the Offers, and has approved the Offers and recommends that Zarlink Shareholders and Debentureholders tender their Shares and Debentures to the Amended Offers.

The total transaction value is approximately US $525 million, net of Zarlink’s cash which is currently US $ 107M. The Amended Offers represent a 67% premium over the closing price of the Shares on the TSX and a 48% premium over the closing price of the Debentures on the TSX on July 19, 2011, the day prior to the initial public announcement of Microsemi’s proposal to acquire Zarlink. The consideration under the Amended Offers represents a 15% premium to the closing price on the TSX of the Shares and a 15% premium to the closing price on the TSX of the Debentures on September 21, 2011, the last trading day prior to this announcement.

"We are excited to add Zarlink to the Microsemi family and to enter into this transaction on a friendly basis," said James J. Peterson, Microsemi’s President and Chief Executive Officer. "Entering the process and performing diligence enabled us to confirm the compelling strategic fit between the two companies. Furthermore, Zarlink’s fundamentals, technology capabilities, product roadmap and revenue growth opportunities exceeded our expectations. By bringing Microsemi’s scale and discipline to this tremendous property, we expect to deliver outstanding results for our shareholders."

Adam Chowaniec, Chairman of Zarlink’s Board of Directors, stated, "After careful consideration of strategic alternatives, protracted negotiations and the receipt of two fairness opinions from our financial advisors, the Zarlink Board of Directors unanimously recommends that Shareholders and Debentureholders tender their Shares and Debentures to the Amended Offers from Microsemi."

Microsemi believes the transaction will be immediately accretive to non-GAAP EPS before synergies. Based on current assumptions, Microsemi expects the acquisition to be $0.24 to $0.26 accretive to non-GAAP EPS in its first full fiscal year ending 2012.