EXFO, VIAVI assume battle stations ahead of special shareholder meeting

Germain Lamonde, founder, chairman, and controlling shareholder of EXFO Inc. (NASDAQ: EXFO; TSX: EXF), and competing test instrument vendor VIAVI Solutions (NASDAQ:VIAV) fortified their positions ahead of a special meeting of EXFO shareholders slated for next Friday, August 13. The meeting will decide whether EXFO’s minority shareholders will accept Lamonde’s proposal to take the company private (see “EXFO’s founder to take company private”) or decide to remain publicly traded – or, VIAVI hopes, somehow force Lamonde to entertain VIAVI’s takeover offer.

Lamonde has offered $6.00 per share to the minority shareholders, an approximately 63% premium on the shares’ price at the time. However, VIAVI has offered $8.00 per share (see “EXFO’s Lamonde again turns away VIAVI approach”) – a proposal that has been turned down by a special committee of EXFO directors because Lamonde has the share ownership power to block it (see “EXFO’s Lamonde to VIAVI: Go away!”).

“I’m a builder, not a seller,” Lamonde stated in an interview last week. “[EXFO] is not for sale; it won’t be for sale.”

Lamonde said that he made the offer to acquire the remaining shares of EXFO at the behest of certain minority shareholders who wished to sell their shares but were having trouble doing so because of the overall lack of liquidity the current ownership arrangement creates. “It was in no shape or form opportunistic,” Lamonde asserted. “I could have done this when the stock price was lower.”

Lamonde describes the choice before shareholders August 13 as a win-win regardless of which way the vote goes. “Shareholders will have two good options,” he said. Not surprisingly, VIAVI paints that choice in a different light. In a press release titled in part “VIAVI Thanks EXFO Minority Shareholders for Strong Support,” VIAVI described the choice at hand as “a coercive ultimatum.”

“Those VIAVI has spoken to support VIAVI's binding superior proposal and believe that Germain Lamonde, EXFO's chairman and majority shareholder, and the EXFO Special Committee should do what is right for all shareholders – not just Mr. Lamonde – and accept VIAVI's binding superior proposal.”

VIAVI then lists the steps it hopes disgruntled EXFO shareholders will take. They include writing Lamonde and other board members, making public statements of support for the VIAVI bid, filing a dissent notice, and/or filing a notice of appearance to be heard at a “fairness hearing” scheduled to take place before the Québec Superior Court on Friday, August 20, 2021.

“They’re only doing this to make noise and confusion,” Lamonde stated of VIAVI’s efforts. However, he acknowledged that he has heard from shareholders who want him to consider his competitor’s proposal. “Some would like me to sell,” he admitted. “But they understand it’s my right to decide not to sell.” Meanwhile, Lamonde said he’s been approached by customers urging him not sell because, Lamonde estimated, an EXFO/VIAVI combined company would control 50% to 80% of certain test equipment markets. “EXFO remaining independent is in the best interest of the industry,” he stated.

EXFO revealed this past Monday that Institutional Shareholder Services Inc., a third-party proxy advisory firm, has recommended that EXFO shareholders vote in favor of Lamonde’s offer to take EXFO private. Lamonde and VIAVI remain firm in their different views on whether the minority shareholders should heed that advice.

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