Corrects Ceragon's mischaracterizations of
Aviat's acquisition proposal, financing commitments, and director
nominations
Reiterates commitment to completing
transaction and provides roadmap to the path forward
AUSTIN,
Texas, July 21, 2022 /PRNewswire/ -- Aviat
Networks, Inc. (NASDAQ: AVNW) ("Aviat"), the leading expert in
wireless transport solutions, today sent a letter to shareholders
of Ceragon Networks Ltd. (NASDAQ: CRNT) ("Ceragon" or "the
Company"), in response to the numerous false and misleading claims
Ceragon's Board and management team recently made regarding Aviat's
premium acquisition proposal and the upcoming Extraordinary Meeting
of Shareholders ("the Meeting" or "EGM"). The Meeting will be held
on August 23, 2022 at 4:00 PM (Israel
time), at the offices of the Company, Nitzba City, Plot 300, Uri
Ariav Street, Bldg. A, 7th floor, Rosh
Ha'ayin, Israel. Shareholders do not have to be present in
person to vote their shares at the meeting.
Dear fellow Ceragon shareholders:
You have a clear choice ahead: One path, a vote FOR our
proposals on Aviat's GOLD proxy card, leads to immediate
value at a premium for your Ceragon shares through a combination
with Aviat. The other likely leads to continued underperformance
and execution risk. Ceragon's Board seek to obscure the truth about
Aviat's premium acquisition proposal and your opportunity to elect
new directors who will actively pursue greater shareholder
value.
We want to clear the air on just three of Ceragon's many
misleading, false, or unfair assertions.
1.
Ceragon is not telling the truth about Aviat's ability to
finance its proposed transaction or about its excessive
demands.
Contrary to Ceragon's false claims, Aviat provided clear proof
of its ability to finance the proposed $2.80 per share cash transaction. On June 3, Aviat provided Ceragon's Board with
copies of highly confident financing letters from three
well-regarded financial institutions. Aviat agreed to provide
binding commitment letters prior to signing an agreed upon
transaction. Ceragon's insistence for fully committed financing
before even entering into negotiations or due diligence is an
off-market and unorthodox demand intended to stonewall the process.
Such commitment letters typically are entered into just prior to
signing the definitive merger agreement. Ceragon's questioning not
only Aviat but three financial institutions is an effort to mislead
you about the certainty of the transaction and to discourage you
from voting for directors who will give it proper
consideration.
Look at the facts: Aviat has zero long-term debt on its balance
sheet and is cash flow positive. By contrast, Ceragon doubled its
debt and produced negative free cash flow in its last fiscal
year.
Ceragon is also misleading you about a break-up fee. Aviat
proposed completely customary market terms for a break-up fee when
we met with Ceragon's Chairman. Aviat agreed that it would pay a
termination fee in the unlikely event that, despite the binding
commitments, it was unable to consummate the transaction. In
response, Ceragon advised that before they would have any
negotiations with Aviat, Aviat would have to agree to a
break-up fee of ~$60 million on a
$235 million transaction, or roughly
25%, far more than is customary.
Ceragon further demanded that if it were to terminate the
agreement with Aviat because of a post-signing superior proposal,
Ceragon should be permitted to do so without the payment of any
termination fee, which is contrary to market practice. We
believe that requiring such unorthodox and off-market provisions as
preconditions to engagement are attempts by Ceragon to create
obstacles to a transaction, and are not the actions of
responsible fiduciaries trying to maximize shareholder value.
Ceragon's Board is hiding behind these pretexts to avoid genuine
engagement with Aviat regarding a transaction that would deliver
immediate value to Ceragon's shareholders.
2.
Ceragon mispresents what its own Articles say regarding the
ability of shareholders like Aviat to nominate and elect
directors.
Ceragon also seeks to confuse and discourage shareholders from
supporting Aviat's five highly-qualified and independent nominees
by advancing a dubious and convoluted legal theory that
misinterprets the Company's own Articles of Association to argue
that shareholders are only entitled to elect three of Aviat's
nominees. We believe that Ceragon's claims are misleading and a
further demonstration of the Board's willingness to overlook the
best interests of their shareholders and entrench themselves in
office.
Ceragon's Board is trying to restrict your ability to take
actions which you are entitled to take at a shareholder meeting, in
order to maintain their own control of the Company. This
paternalistic attitude now manifests itself in a strained legal
interpretation of the Company's Articles. The Israeli Companies Law
and the Articles specifically allow Ceragon shareholders to elect
new directors at the upcoming EGM. Ceragon's position essentially
reads into Article 41 of its Articles a limitation that the
vacancies to be filled must be "newly created." However, the
Article itself speaks of "any vacancies," and the Article does not
support Ceragon's position. Ask yourself are these the actions
of a Board seeking to maximize shareholder value, or are they the
actions of a Board seeking to rig an election to keep themselves in
control? If Ceragon's shareholders vote in favor of all five of
Aviat's nominees and Ceragon attempts to deny two of them a seat on
the Board, Aviat will seek immediate injunctive relief to correct
such wrongdoing.
Aviat strongly encourages Ceragon shareholders to disregard the
Ceragon Board's manufactured legal position and blatant violation
of their fiduciary duties by electing all five of Aviat's
nominees at the EGM. Once elected, we are confident that all
five directors will be seated on the Ceragon Board, and that the
Board will then have the independence to evaluate Aviat's proposal
and the best way to create value for shareholders.
3.
Ceragon has done everything possible to avoid striking a deal
with Aviat that would benefit Ceragon's shareholders.
Ceragon now claims that it is "willing to transact with Aviat or
any other party that delivers full, fair and certain value to our
shareholders." But the Ceragon Board's own actions reveal that
those are empty words.
For the past year, Aviat has attempted to negotiate a premium
transaction, secured financing assurances from multiple lenders,
sought to engage the Board on multiple occasions, and traveled to
Israel to attempt to negotiate in
good faith. We agreed that the transaction would only be entered
into with binding financing commitments, we agreed that we would
pay a reasonable termination fee in the remote chance that the
financing commitments were not honored, and we agreed that if after
signing, Ceragon were presented with a superior proposal, they
could terminate our transaction, subject only to abiding by
customary matching rights and paying a market standard termination
fee. And Ceragon still refused to engage in discussions.
Instead, Ceragon's Board and management have derailed any
possibility of negotiations, hoping that Aviat would quietly go
away and Ceragon's shareholders would never learn about Aviat's
premium offers.
The facts speak for themselves:
Although the Ceragon Board now claims to be willing to enter a
transaction that "delivers full, fair and certain value" to
shareholders, you should understand that they (1) declined even to
name a price and indicated that it would take two months to
determine one and (2) established off-market conditions precedent
to having any substantive discussions, as described above. You
should be frustrated by your Board's delay tactics that have only
resulted in loss of value.
Mr. Zisapel, Ceragon's Chairman, tried in October 2021 to interest us in a potential
acquisition by Aviat of one of his private portfolio companies,
with an asking price ranging between $150
million and $200 million.
Perhaps Mr. Zisapel believes that his own interests (not yours)
will be best served if Aviat acquired this portfolio company,
rather than Ceragon. Given that Mr. Zisapel was pushing for an
Aviat acquisition of his own portfolio company, it is clear that he
does have confidence in Aviat's ability to finance and complete a
transaction.
Ceragon would have you believe that Aviat's proposal is "not a
real offer." After many months of attempts to engage in
negotiations for a friendly transaction, only to be shunned by
Ceragon's Board at every turn, Aviat had little choice but to bring
our offer directly to your attention. Do you really think Aviat
would invest in this extraordinary course if it wasn't fully
confident that it could finance a transaction? What is not "real"
is Ceragon's Board's protestations that it is open to negotiations
and trying to achieve the best value for its shareholders. There
should be no question: Aviat is committed to this transaction,
we have the financing capability to complete it, and we see a clear
path forward.
Given the Ceragon Board's continued refusal to engage in
discussions, that path relies on your support to remove three of
Ceragon's entrenched and biased directors and vote for all five
of the Aviat nominees at the upcoming Meeting. The newly
constituted Board, with the addition of independent and highly
qualified directors, would then review Aviat's acquisition
proposal, appropriately and in accordance with its fiduciary
duties, and determine if Ceragon should negotiate towards a
friendly transaction with Aviat. We firmly believe that an
unbiased, independent Board will recognize the clear strategic
rationale for this combination and the certain value it will
provide to Ceragon shareholders. Leading analysts recognize that
value and overwhelmingly support a combination of Aviat and
Ceragon1:
- Alex Henderson and
Matt Dezort of Needham &
Company: "Much Better Together: Aviat and Ceragon combined
would bring together strong technology, represent a larger US
market share, and benefit from better scale, and better penetration
of Enterprise and Government markets. We have told both management
teams a merger makes strategic sense."
- George Iwanyc of Oppenheimer
& Co.: "Bottom Line: We view Aviat's offer positively for
Ceragon and see potential value in combining the two
companies."
- Scott W. Searle of Roth
Capital Partners: "Potentially hugely accretive… We estimate
that financed with debt and with fully recognized cost synergies
that the combined entity could conservatively generate EPS 30%+
above current model expectations."
- Tim Savageaux of Northland
Capital Markets: "We see multiple strategic, with a very
complimentary mix of private vs carrier and US vs Intl exposures,
and financial positives from the proposed deal, reflected only in
small part in our increased PT, with revenue and COGS synergies
likely beyond the $35M in annual cost
savings the company is targeting."
Whether you own many shares or only a few, your vote is
important and your voice should be heard. Please immediately
complete and return Aviat's GOLD proxy card, voting FOR our
proposals to remove three directors from the Ceragon Board and
elect all five of the Aviat nominees. Should you receive a
white proxy card from Ceragon, please do not sign and return it.
Instead, discard any white proxy cards you may receive.
Sincerely,
Peter A. Smith
Aviat Networks
President and Chief Executive Officer
About Aviat Networks,
Inc.
Aviat Networks, Inc. is the leading expert in wireless
transport solutions and works to provide dependable products,
services and support to its customers. With more than one million
systems sold into 170 countries worldwide, communications service
providers and private network operators including state/local
government, utility, federal government and defense organizations
trust Aviat with their critical applications. Coupled with a long
history of microwave innovations, Aviat provides a comprehensive
suite of localized professional and support services enabling
customers to drastically simplify both their networks and their
lives. For more than 70 years, the experts at Aviat have delivered
high-performance products, simplified operations, and the best
overall customer experience. Aviat Networks is
headquartered in Austin, Texas. For more information,
visit www.aviatnetworks.com or connect with Aviat
Networks on Twitter, Facebook and LinkedIn.
Forward-Looking
Statements
The information contained in this document includes
forward-looking statements within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995. Such statements include, without limitations, statements
regarding the proposed transaction between Aviat and Ceragon, the
results of the requested extraordinary general meeting of
shareholders of Ceragon, Ceragon's actions in connection therewith,
and any potential related litigation. All statements, trend
analyses and other information contained herein regarding the
foregoing beliefs and expectations, as well as about the markets
for the services and products of Aviat and trends in revenue, and
other statements identified by the use of forward-looking
terminology, including, without limitation, "anticipate,"
"believe," "plan," "estimate," "expect," "goal," "will," "see,"
"continue," "delivering," "view," and "intend," or the negative of
these terms or other similar expressions, constitute
forward-looking statements. Forward-looking statements are neither
historical facts nor assurances of future performance. Instead,
forward-looking statements are based on estimates reflecting the
current beliefs, expectations and assumptions of the senior
management of Aviat regarding the future of its business, future
plans and strategies, projections, anticipated events and trends,
the economy and other future conditions. Such forward-looking
statements involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by
the forward-looking statements. Forward-looking statements should
therefore be considered in light of various important factors,
including those set forth in this document. Therefore, you should
not rely on any of these forward-looking statements. Important
factors that could cause actual results to differ materially from
estimates or projections contained in the forward-looking
statements include the following:
- the impact of COVID-19 on our business, operations and cash
flows;
- continued price and margin erosion as a result of increased
competition in the microwave transmission industry;
- our ability to realize the anticipated benefits of any proposed
or recent acquisitions, including our proposed transaction with
Ceragon, within the anticipated timeframe or at all, including the
risk that proposed or recent acquisitions will not be integrated
successfully;
- the results of the extraordinary general meeting of Ceragon's
shareholders;
- the impact of the volume, timing, and customer, product, and
geographic mix of our product orders;
- the timing of our receipt of payment for products or services
from our customers;
- our ability to meet projected new product development dates or
anticipated cost reductions of new products;
- our suppliers' inability to perform and deliver on time as a
result of their financial condition, component shortages, the
effects of COVID-19 or other supply chain constraints;
- the effects of inflation and the timing and extent of changes
in the prices and overall demand for and availability of our
inputs;
- customer acceptance of new products;
- the ability of our subcontractors to timely perform;
- weakness in the global economy affecting customer
spending;
- retention of our key personnel;
- our ability to manage and maintain key customer
relationships;
- uncertain economic conditions in the telecommunications sector
combined with operator and supplier consolidation;
- our failure to protect our Intellectual property rights or
defend against Intellectual property infringement claims by
others;
- the results of our restructuring efforts;
- the ability to preserve and use our net operating loss
carryforwards;
- the effects of currency and interest rate risks;
- the effects of current and future government regulations,
including the effects of current restrictions on various commercial
and economic activities in response to the COVID-19 pandemic;
- general economic conditions, including uncertainty regarding
the timing, pace and extent of an economic recovery in the United States and other countries where we
conduct business;
- the conduct of unethical business practices in developing
countries;
- the impact of political turmoil in countries where we have
significant business;
- the impact of tariffs, the adoption of trade restrictions
affecting our products or suppliers, a United States withdrawal from or significant
renegotiation of trade agreements, the occurrence of trade wars,
the closing of border crossings, and other changes in trade
regulations or relationships; and
- Aviat's ability to implement our stock repurchase program or
the extent to which it enhances long-term stockholder value.
For more information regarding the risks and uncertainties for
Aviat's business, see "Risk Factors" in Aviat's Annual Report on
Form 10-K filed with the U.S. Securities and Exchange Commission
("SEC") on August 25, 2021 as well as
other reports filed by Aviat with the SEC from time to time. Aviat
does not undertake any obligation to update publicly any
forward-looking statement, whether written or oral, for any reason,
except as required by law, even as new information becomes
available or other events occur in the future.
Additional
Information
This document does not constitute an offer to sell or exchange,
or the solicitation of an offer to buy or exchange, any securities,
nor will there be any sale of securities in any states or
jurisdictions in which such offer or sale or exchange would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
will be made except by means of a prospectus meeting the
requirements of section 10 of the Securities Act of 1933 or an
exemption therefrom.
In connection with any transaction between Aviat and Ceragon
that involves the issuance of Aviat shares to the Ceragon
shareholders, Aviat will file a registration statement with the
SEC. INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT, ANY
AMENDMENTS THERETO AND OTHER RELEVANT DOCUMENTS THAT MAY BE FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
TRANSACTION. Investors will also be able to obtain copies of the
registration statement and other documents containing important
information about each of the companies once such documents are
filed with the SEC, without charge, at the SEC's web site at
www.sec.gov.
Investor Contacts
Aviat Networks
Andrew Fredrickson
+1-408-501-6214
andrew.fredrickson@aviatnet.com
Okapi Partners LLC
Bruce Goldfarb / Chuck Garske / Teresa
Huang
+1-212-297-0720
info@okapipartners.com
Media Contact
Abernathy
MacGregor
Sydney Isaacs / Jeremy Jacobs
+1-212-371-5999
sri@abmac.com / jrj@abmac.com
1Permission to use quotations was neither sought nor
obtained.
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SOURCE Aviat Networks, Inc.