EXFO’s chairman spurns yet another offer from Viavi

Viavi Solutions really, really wants to buy rival test company EXFO, and it has made a fourth and higher purchase offer — which was promptly quashed, again, by EXFO founder, chairman and majority shareholder Germaine Lamonde.

Viavi had upped its most recent offer from $7.50 per share to $8 — valuing EXFO at nearly $460 million — and put together a proposed arrangement “based substantially” on Lamonde’s own go-private offer, which he extended in early June and which offers up $6 per share to EXFO’s minority shareholders. Viavi called Lamonde’s offer “inadequate” considering EXFO’s recent quarterly results, particularly its bookings, which were up more than 47% year-over-year.

Lamonde directly or indirectly controls 61.46% of the issued and outstanding shares of EXFO and 93.53% of the voting rights associated with those shares; EXFO’s board has rejected Viavi’s previous offers, including the $7.50 per share offer, because of Lamonde’s unequivocal opposition. EXFO shareholders will consider in a special meeting on August 13 whether to keep EXFO a public company or take it private under Lamonde’s $6 per share offer, and he has repeatedly said that he will not consider any other options — including Viavi’s escalating offers.

That didn’t stop Viavi from trying again. The two parties continued their dueling press releases this morning, in which Viavi alternately coaxes and gushes about the “clear strategic merits” of the transaction, while making pointed references to the even larger amount of cash that it is now offering. “The strength of the combined [Viavi and EXFO] teams and technology, with significantly greater scale and financial resources, would enable strong investment in growth while achieving greater operating leverage than either company could do alone,” Viavi says in its release, going on to assure readers that “Viavi values the expertise, skills and experience of the EXFO key employee talent and believes their retention and continued commitment is critical to the success of the combination. Viavi intends to continue EXFO’s brand and legacy, recognizing EXFO’s strong reputation built on years of quality product development, engineering excellence and customer service, and continue EXFO’s presence and operations in Quebec to complement and expand upon Viavi’s long-standing engineering and product development teams in Quebec and Ottawa.”

“Viavi’s enhanced proposal allows all EXFO shareholders to recognize significant value for their shares, including Mr. Lamonde, who would receive the same superior premium as other shareholders, and given his sizeable interest, would benefit significantly from Viavi’s proposal,” Viavi adds. “In light of the significant value being provided to shareholders under the proposal, we would expect the EXFO Special Committee, consistent with their fiduciary duties to all shareholders, to immediately engage with us and Mr. Lamonde and make every effort to persuade Mr. Lamonde to support VIAVI’s superior transaction.”

Less than two hours after Viavi’s press release was posted, Lamonde put out his own response that boiled down to: Again, no.

“For the fourth time, I make it crystal clear to Viavi and to my board of directors at EXFO that as controlling shareholder of EXFO, I would not consider any transaction with Viavi, or any other change of control transaction,” Lamonde wrote. “Viavi knew full well I would reject any new non-binding, non-executable tentative proposal, which in my view is only intended to create distortion in the current go-private process and is simply aimed at eliminating Viavi’s main competitor – it is clearly not in the best interest of Viavi and EXFO customers as they would end up paying much higher prices for the products we sell, having less services and no longer benefit from EXFO’s incredible innovation engine.

“I have been clear and unambiguous with EXFO shareholders since June 7 that they have a choice of accepting my formal offer of US$6.00 per Subordinate Voting Share or remaining a public company,” Lamonde wrote. “My position has not changed since then and nor will it change, no matter how many times EXFO’s primary competitor tries to interfere in the process for its own benefit.”

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