Vishay Offer Found to be Inadequate, and Not in the Best Interests of IRF Shareholders
EL SEGUNDO, Calif.--(BUSINESS WIRE)--
International Rectifier Corporation (NYSE:IRF) said today that it
has filed with the Securities and Exchange Commission and mailed to
shareholders a letter outlining the critical importance of electing
the three nominees of the Company at the October 10th meeting.
Richard J. Dahl, Chairman of the Board of International Rectifier
said: "The IRF Board of Directors has unanimously deemed Vishay's
$23.00 offer to be inadequate taking into account the future prospects
of IRF and the synergies that Vishay can derive from this acquisition.
It is regrettable that Vishay continues to make assertions that are
flawed, misleading and factually inaccurate. The IRF Board underscored
the serious risks embedded in Vishay's offer, including its ability to
obtain financing and the serious conflict of interests the election of
Vishay's handpicked slate of directors could present."
The full text of the letter follows:
BEWARE!!! VISHAY DOES NOT HAVE YOUR BEST INTERESTS IN MIND
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VOTE FOR IRF'S DIRECTORS AT THE 2007 ANNUAL MEETING
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VS.
A HIGHLY CONDITIONAL INADEQUATE $23.00 OFFER
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September 29th, 2008
Dear Fellow Shareholder:
Your vote at the 2007 Annual Meeting of IRF Shareholders to be held on
October 10th is critical. As you know, International Rectifier (NYSE:
IRF) received a revised unsolicited, non-binding offer from Vishay
Intertechnology (NYSE:VSH) to acquire IRF for $23.00 in cash per
share and Vishay commenced today a tender offer at that price. Your
Board of Directors has unanimously rejected the $23.00 offer as
financially inadequate. Vishay's offer is highly conditional and
subject to the receipt of the proceeds of financings which it may
never obtain in this turbulent credit market.
VISHAY IS TRYING TO DEPRIVE YOU OF THE FULL VALUE OF YOUR STOCK -- THE
VALUE OF THE FUTURE UPSIDE IN THE STOCK AND THE VALUE OF SYNERGIES TO
VISHAY
-- Vishay's offer does not fully reflect the long-term value of IRF
and the Company's future prospects. Our September 22nd, 2008
Investor Presentation, which sets out our strategic roadmap for
shareholder value creation, describes in detail why not. We urge
you to review this presentation (available on the Company's
website at www.irf.com and on the SEC's website at www.sec.gov)
as soon as possible and in any event prior to making any decision
on your vote at the 2007 Annual Meeting. We have set out below
some brief highlights from the presentation and the reasons for
the Board's rejection of the offer:
-- The IRF Board believes that the strategic roadmap to be
implemented by the management team will deliver greater value
to the IRF shareholders than Vishay's inadequate offer
-- IRF has a comprehensive product portfolio of analog, discrete
and mixed signal integrated circuits targeted at a number of
the most attractive high growth end segments such as
automotive and aerospace and defense
-- In addition to growth opportunities in its existing segments,
the successful development of IRF's revolutionary GaN
technology uniquely positions IRF to benefit from significant
share shifts
-- CEO Oleg Khaykin and his team have put in place a detailed,
focused and achievable three phase strategic plan with the
goals of reviving top-line growth while at the same time
demanding operational excellence within the organization to
drive gross and operating margins of approximately 45% and
approximately 20%, respectively
-- The management team has already made significant progress in
executing the strategic roadmap, including an aggressive
program of channel inventory rationalization and
approximately $30 million of annualized cost of goods sold
improvements
-- We do not believe that Vishay's offer reflects the manufacturing
synergies, operating expense synergies and revenue synergies that
could be achieved by Vishay in an acquisition of IRF
-- Do you think it is a coincidence that Vishay opportunistically
initially published its proposal:
-- Right after the Company completed its restatement and before
it announced its fiscal year 2008 results?
-- At a time when the Company was trading close to its 5-year
low?
-- At a low point in the cycle for the semiconductor industry?
-- During one of the toughest M&A markets in recent years?
-- During a period of extraordinary credit market turbulence and
uncertainty?
-- We believe Vishay's goal is to acquire the Company on the cheap
which would deprive our shareholders of the value they deserve
and have waited for through a challenging period for the Company
VISHAY'S $23.00 OFFER -- IS IT REAL?
-- Approximately three weeks after indicating its intention to launch
a tender offer, Vishay finally launched its offer to purchase IRF
shares at $23.00 per share. Instead of providing greater clarity
and certainty to IRF shareholders the offer to purchase is highly
conditional not only in relation to Vishay's ability to raise the
funds to pay for IRF shares but also in providing Vishay with
maximum flexibility to choose not to complete the tender offer.
We have listed below the "significant conditions" highlighted by
Vishay in its offer:
-- Obtaining financing for the transaction and potential
refinancing of certain Vishay debt
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-- Minimum tender condition of at least a majority of fully
diluted IRF shares
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-- Absence of any agreement or transaction which would impair the
expected value of IRF to Vishay
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-- Expiration of termination of all regulatory waiting periods,
including Hart-Scott-Rodino
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-- Inapplicability of Section 203 of the Delaware General
Corporation Law
-- Redemption of IRF's rights under its shareholder rights plan
-- Vishay did not deem it appropriate to highlight numerous other
conditions to its offer to purchase to be "significant
conditions" despite these conditions reserving Vishay's right, in
Vishay's sole discretion, to terminate the tender offer. For
instance, Vishay has the ability not to complete the offer in the
event of a decline in either the Dow Jones Industrial Average or
the Standard & Poor's 500 Index by an amount in excess of 15%
measured from the close of business today. In light of the
current volatile equity market, in which today alone the Dow
Jones Industrial Average or the Standard & Poor's 500 Index
declined by 7% and 9% respectively, this provision increases
further the risk and uncertainty for IRF shareholders of
accepting Vishay's offer.
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-- In relation to the financing condition, Vishay itself acknowledges
in its offer to purchase the significant risk of obtaining the
financing necessary to complete the transaction, particularly "in
light of the current crisis in the U.S. financial services
industry". It is six weeks since Vishay made its initial proposal
public on August 15th, 2008 yet they are still "working with"
Banc of America and Morgan Stanley to secure commitments and no
definitive arrangements have been announced
-- Even if Vishay eventually confirms it has received commitments to
fund the transaction, you should be sure to read the fine print -
what conditions will the funding be subject to? How certain will
that financing be?
THE OCTOBER 10th MEETING IS A REFERENDUM ON THE INADEQUATE AND
OPPORTUNISTIC $23.00 OFFER BY VISHAY WHICH MAY NOT MATERIALIZE
THE REJECTION OF THE VISHAY NOMINEES IS CRITICAL
-- This election is not just another "short slate" election where
dissident nominees will "shake up" a board
-- Support for the Vishay group would be an endorsement of a mediocre
and untimely offer -- which may never close -- and could
significantly undermine the Board's negotiating leverage with
Vishay or with any third party if the Board determined to sell
the Company
-- Indeed, if a sale process commenced, how would likely bidders for
the Company respond if nominees of one of the bidders -- Vishay
-- were on the Board and a part of the process? How would these
prospective bidders view the $50,000 Vishay payment to each of
its nominees?
-- To be sure, now is not a sensible time to put the Company up for
sale. Except to seek to compel a sale of the Company in one of
the worst merger and credit markets in memory, what would the
three Vishay nominees add? Their presence on the Board --
nominees of Vishay threatening meritless litigation with the
Company -- could be very disruptive and destabilizing
-- The Company's Board and its management are seeking to create
significant shareholder value and it is not in the shareholders'
interests for the Board and management to be diverted and
frustrated in this goal and forced to function in a climate of
uncertainty. Support for the Board's nominees in October could
end this costly and unproductive distraction now
ALL OF THE NOMINEES OF THE COMPANY ARE EMINENTLY QUALIFIED AND SUPPORT
A PROGRAM TO DELIVER SHAREHOLDER VALUE
-- One of the Company nominees was appointed in March 2008 and the
other in May 2008 following a comprehensive search and vetting
process and both have made meaningful contributions to the
Company Board during their relatively short tenure to date
-- The CEO and the Chairman of the Board are also new to the Board --
4 of the present 8 directors are new. The Company does not need
Vishay nominees to have a "fresh look"
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-- The third nominee, Dr. Jack Vance, performed the role of lead
independent director during the restatement process and has been
an important source of continuity for the subsequent litigation
and regulatory processes
-- These three Company nominees are part of a team designed for and
dedicated to shareholder value enhancement and, right now,
support the Company's strategic plan to achieve that goal
KEEP THE BOARD AND NEW LEADERSHIP TEAM INTACT
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ALL OF VISHAY'S PROPOSED BYLAW AMENDMENTS ARE DESIGNED TO LIMIT THE
IRF BOARD'S ABILITY TO ACT IN THE BEST INTERESTS OF SHAREHOLDERS
-- The IRF Board has stated that the 2008 annual meeting would be
held in early 2009. Vishay's demand to hold the 2008 annual
meeting by December 21, 2008, is an attempt to reduce the amount
of time available to the Board and undermine the Board's
negotiating position vis-a-vis Vishay or other potentially
interested parties if the Board were to determine to evaluate and
potentially pursue value-maximizing alternatives
-- Vishay's proposed bylaw amendments could be invalid under Delaware
law as seeking to limit the IRF Board's ability to fully exercise
its fiduciary responsibilities in responding to changing
circumstances
-- The IRF Board's policy is that it would not adjourn any meeting
without shareholder approval if a quorum is present. So why is
Vishay making an irrelevant offer to prevent an adjournment of an
annual meeting when a quorum is present? Is it another one of its
misleading attempts to create doubt in your minds about the
Board's willingness to act in the best interests of the
shareholders?
-- Vishay's attempt to overturn bylaw amendments by the Board is
intended to restrict the Board's flexibility and its ability to
govern the Company in the best interests of our shareholders
-- All of Vishay's proposed amendments are designed to further
Vishay's goal of acquiring IRF for an inadequate price
KEY VISHAY ASSERTIONS ARE FLAWED, MISLEADING AND FACTUALLY INACCURATE
-- You may have seen by now the presentation filed by Vishay with the
SEC on September 24, 2008. We want to set the record straight on
certain of these inaccuracies and fallacies, and the misleading
comments made by Vishay
-- $23.00 represents a "71% premium to trading value of enterprise"
and "30% premium to IRF's average closing price for 30 trading
days preceding Vishay's original offer"
-- Vishay ignores the obvious fact that the IRF stock price has
been artificially depressed as a result of the overhang from
the restatement process and the related restrictions on the
new management team's ability to communicate the strategic
roadmap to shareholders until now. No doubt the opportunistic
timing of Vishay's approach is no coincidence and is designed
to take advantage of this very fact
-- Vishay focuses solely on near-term trading averages in
calculating the implied premium. A longer-range of averages
would argue for a much higher valuation of IRF:
Premium/(Discount) to(1) Stock Price Enterprise Value per Share
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52 Week High (41.3)% (54.4)%
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3 Year Average (33.6)% (51.9)%
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2 Year Average (28.9)% (45.7)%
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1 Year Average (14.5)% (22.5)%
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6 Month Average 7.9% 15.5%
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30 Trading Day Average 30.1% 70.1%
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-- Why did Vishay compare its offer to trading multiples in the
industry? It appears it has forgotten that trading multiples do
not include acquisition premiums. We see this as further
confirmation of Vishay's attempts to acquire IRF for an
inadequate price reflecting no premium to the base-line trading
value of the Company
-- We would also note that revenue growth is not the only driver
of revenue multiples - profitability is the other important
determinant, and we are at levels of depressed profitability
which we are addressing through our strategic plan
-- "Vishay's $23.00 per share offer reflects a fair allocation of
synergy benefits"
-- What level of synergies has Vishay reflected in its offer? How
much has it allocated to IRF shareholders in its $23.00 offer
-- "Lost two R&D leaders and EVP of Global Sales and Marketing"
-- This is incorrect
-- Mike Briere, one of the industry's leading luminaries, has
returned to IRF following Oleg's appointment as he buys into
our strategic direction
-- We would also note that not all terminations following the
restatement were voluntary
THE REJECTION OF THE VISHAY NOMINEES IS CRITICAL VOTE THE WHITE PROXY
CARD FOR IRF'S DIRECTORS AT THE 2007 ANNUAL MEETING
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In sum, electing Vishay's nominees and approving Vishay's proposed
bylaw amendments would further its inadequate and opportunistic
acquisition offer and seek to undermine the ability of our Board to
make an independent determination as to the alternative that is in
the best interests of IRF's shareholders.
Your Board believes that it is in the best interests of the Company
and all of its shareholders to vote FOR each of the Board's nominees
and vote AGAINST each of Vishay's bylaw amendments.
In order to ensure that your vote is cast in support of your Board,
please ONLY vote the WHITE International Rectifier Proxy Card or
voting instruction card enclosed with this letter. We urge you not to
sign and return any blue proxy card or voting instruction card that
you may receive from Vishay not even as a vote of protest.
Please vote the enclosed WHITE proxy card or voting instruction card
by telephone or via the Internet following the instructions contained
on the WHITE proxy or voting card. Alternatively, please mark, sign,
date and return the enclosed WHITE proxy card or voting instruction
card using the postage pre-paid return envelope enclosed with the
WHITE proxy card. If you have any questions or need assistance voting
your shares, please call D. F. King & Co., Inc., who is assisting
International Rectifier, toll-free at 1-888-605-1957.
We look forward to continuing to hear the views of our shareholders
and, in turn, to communicate the value and impact of our promising
strategic plan. Thank you for your continued support of International
Rectifier.
On Behalf of the Board of Directors,
Oleg Khaykin, CEO
Richard Dahl, Chairman
Notes:
1. Source: Factset, DataStream, and public filings. 52 Wk high and
various averages all as of 14-Aug-2008. The (41.3)%, (33.6%),
(28.9%), (14.5%) discounts and 7.9% and 30.1% premia were calculated,
respectively, based on the Company's highest share price ($39.15 on
August 22, 2007) during the past 52 weeks and the Company's average
share prices of $34.64 over the prior three years, $32.37 over the
prior two years, $26.89 over the prior year, $21.32 over the prior
six months and $17.69 over the prior 30 trading days. Enterprise
value per share is calculated by taking IRF's equity market
capitalization at the specified date or during the specified period,
adding the relevant quarter debt balance, deducting the relevant
quarter cash balance and then dividing by the number of basic shares
outstanding (average basic shares outstanding for historical
quarters, basic shares outstanding as of the end of the most recent
quarter for the current quarter). In the case of the Vishay offer,
enterprise value per share is calculated by taking the total equity
value of Vishay's $23.00 offer, deducting the most recent quarter
cash balance and then dividing by the number of basic shares
outstanding.
Forward-Looking Statements
Certain statements made in this letter, including statements
regarding future financial and operating performance and conditions of
International Rectifier Corporation (the "Company"), are
"forward-looking" statements. These statements may be identified by
the use of forward-looking terminology such as the words "expects,"
"intends," "believes," "anticipates," "may," "should" and other terms
with similar meaning indicating possible future events or actions or
potential impact on the business or shareholders of the Company.
Except for historical financial and business performance information,
statements made in this letter should be considered "forward-looking."
These forward-looking statements speak only as of the date of this
letter; we disclaim any obligation to update these statements, and we
caution you not to rely on them unduly. Much of the information that
looks towards future performance of our company is based on various
factors and important expectations and assumptions about future events
that may or may not actually come true. While our management considers
these expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic, competitive,
regulatory and other risks, contingencies and uncertainties, most of
which are difficult to predict and many of which are beyond our
control, including, without limitation, pending and future
governmental inquiries and market demand. As a result, our operations
and financial results in the future could differ materially and
substantially from those we have discussed in the forward-looking
statements made in this letter. More information about certain risks
and uncertainties is included in the Company's annual report on Form
10-K for the fiscal year ended June 30, 2008. This report and the
Company's previously filed documents are on file at the SEC and are
readily obtainable at no charge at www.irf.com and www.sec.gov.
Disclaimer
This letter includes statements and information from previously
published material. Permission to reprint or use these statements was
neither sought nor obtained.
About International Rectifier
International Rectifier Corporation (NYSE:IRF) is a world leader
in power management technology. IR's analog, digital, and mixed signal
ICs, and other advanced power management products, enable high
performance computing and save energy in a wide variety of business
and consumer applications. Leading manufacturers of computers, energy
efficient appliances, lighting, automobiles, satellites, aircraft, and
defense systems rely on IR's power management solutions to power their
next generation products. For more information, go to www.irf.com.
Note: Statements made or implied in this release that are in the
future tense or that are accompanied by words such as "will," or
variations of such words are "forward-looking" and involve risks and
uncertainties that are not within International Rectifier's control. A
fuller explanation of these risks and uncertainties, including those
related to the changes to the company's internal controls and
governance policies, is contained in International Rectifier's
periodic and other filings from time to time with the Securities and
Exchange Commission.
Source: International Rectifier Corporation
