ISS calls out the Ceragon Board's passive
approach and that "lack of clear progress" could send CRNT stock
lower in the absence of a transaction
Also notes Ceragon's track record of
underperformance relative to peers and the risks of standalone
execution of its strategy
Aviat urges shareholders to vote on the GOLD
proxy card for ALL FIVE Aviat nominees to elect directors who will
support near- and long-term value creation at Ceragon
AUSTIN,
Texas, Aug. 10, 2022 /PRNewswire/ -- Aviat
Networks, Inc. (NASDAQ: AVNW) ("Aviat"), the leading expert in
wireless transport solutions, today announced that independent
proxy advisory firm Institutional Shareholder Services ("ISS") has
recommended that shareholders of Ceragon Networks Ltd. (NASDAQ:
CRNT) ("Ceragon") vote FOR the removal of two members of Ceragon's
Board of Directors ("Board"), Yael
Langer and Ira Palti, at the
upcoming Extraordinary General Meeting of shareholders on
August 23, 2022. Aviat continues to
believe that shareholders should vote for the removal of all
three Ceragon directors, Yael
Langer, Ira Palti and
David Ripstein, and FOR the election
of all five of Aviat's director nominees.
"We are pleased that ISS recognizes the need for boardroom
change at Ceragon, to ensure an independent evaluation of strategic
alternatives, including Aviat's acquisition proposal," said Aviat
President and CEO Peter Smith. "We
believe, however, that the fastest path to a premium transaction
lies in not just removing two of Ceragon's entrenched directors,
but also removing ALL THREE of the targeted directors, and electing
our highly qualified director nominees to independently consider
value creation opportunities. We strongly urge shareholders to
vote FOR both of Aviat's proposals using the GOLD proxy card as
soon as possible."
In its August 9, 2022, report ISS
called out the 5-year track record of underperformance overseen by
Ceragon's current Board members, and questioned their ability to
effect a turnaround by executing its current
strategy:1
- "In general, CRNT underperformed peers and the Nasdaq
index over all measurement periods ended on the unaffected
date. Over the one-year period through the unaffected date, CRNT's
TSR was 7.8 percent below the TSR of the selected peers. Extending
the TSR analysis over a period of three and five years, we observe
that the gap widens. More precisely, over the three-year and
five-year periods through the unaffected date, CRNT's TSR was 33.8
percent and 45.6 percent, respectively, below the TSR of the peer
group ... While revenue growth deceleration has also been an issue
at peers, the company' gross margins are below pre-pandemic levels
and have not shown signs of recovery over the past several
quarters."
- "Fundamental data on bookings and backlog is rather
unstable to support the notion of a turnaround in fortunes at
this point."
- "Over the last three years to the unaffected date, Ceragon
has traded at a discount to the peer group. During this period,
CRNT traded at a median 0.7x EV/NTM sales versus the peer group's
1.3x. This translates to a median discount of approximately 44
percent over the same period. The revised acquisition consideration
implies an EV/ NTM sales multiple of 0.84x versus 0.77x initially
offered. The revised offer represents a 20-percent premium over the
historical multiple. Similarly, using the peer group current
multiple, applying the typical 44 percent discount, and using
CRNT's forward sales, we estimate a theoretical standalone value of
USD 2.44 per share, to which the new
offer represents a 26.3 percent premium. The CRNT stock was
already in a downturn and lack of clear progress could, in any
event, send the stock lower in the short term in the absence of a
transaction."
In its report, ISS critiqued the Board's refusal to engage in
negotiations with Aviat regarding a potential transaction, and its
generally passive approach to maximizing shareholder value.
- "It is questionable to what extent the board has been open
to negotiating a deal; the board was apparently more concerned
with issues that would be secondary to price, like firm financing
commitment or a high level of breakup fees. One would typically
discuss price and type of consideration, which would lead to
financing needs, financing commitments, level of breakup fees and
the like."
- "The company's statement that is 'willing to transact with
Aviat or any other party that delivers full, fair and certain value
to our shareholders' appears to imply the board sitting
passively, expecting a bidder to come with the perfect offer
without prior discussions."
- "The target board does not appear to have engaged in
detailed discussions, and, leaving aside the potential for a
deal, does not appear to inspire confidence in investors in
addressing the strategic challenges the company faces. The apparent
standalone execution risks and governance concerns lead to the
conclusion that some board change is warranted to ensure a more
fulsome evaluation of strategic alternatives."
In its report, ISS also questioned the independence of certain
board members from Ceragon Chairman Zohar Zisapel, as well as Mr.
Zisapel's own sale of Ceragon stock at a price far in excess of
where the stock trades today.
- "Chairman and co-founder Zisapel sold approximately one-third
of his CRNT shares at approx. USD
5.40 per share in early 2021 though did not reinvest the
proceeds at prices below USD 2.00
per share in early 2022."
- "Removing Yael Langer, who has a 20-year tenure on the board
and has been involved in a multitude of RAD group companies, and
Ira Palti, the 16-year former CEO of
the company, would send a strong message regarding the need to
appoint strong, independent board members that could bring a fresh
view to the company's challenges."
- "The targeted directors are (or were for a long time) related
to the RAD group and investors may question to what extent they
would challenge the company's chairman/co-founder; the founder
and the three directors represent a majority of the board."
Mr. Smith added, "Aviat's revised premium proposal announced on
August 2 to acquire Ceragon for
$3.08 per share – including
$2.80 per share in cash and
$0.28 in equity consideration of
Aviat stock – represents a tremendous premium of 47% to the closing
price of Ceragon shares on June 27,
2022, and provides a balance of immediate and long-term
value, allowing shareholders of both Aviat and Ceragon to benefit
from the significant upside of the combined company. Based on
Ceragon Board's refusal to date to work towards a negotiated
transaction, we fear that shareholders stand to lose this
premium offer if ALL FIVE of the Aviat nominees are not elected,
as Ceragon's Board is clearly unwilling to enter into
negotiations, as noted by ISS. Only by voting FOR ALL
FIVE of Aviat's director nominees on the GOLD proxy card
can shareholders realize the considerable value of this
combination."
Mr. Smith concluded, "We have shown time and time again that we
are interested in working with Ceragon's Board to determine a
positive outcome, as evidenced by our revised premium offer. We
have attempted at every turn to respond to Ceragon's request,
including providing Ceragon's Board with copies of highly confident
financing letters from three well-regarded financial institutions
on June 3. We also agreed to provide
binding commitment letters prior to signing an agreed-upon
transaction and to pay a termination fee in the unlikely event that
we are unable to consummate the transaction. On this point we can
strongly assure ISS that Aviat has sufficient certainly regarding
financing.
YOUR VOTE IS CRUCIAL. For further information on how your
vote FOR ALL FIVE Aviat's director nominees can
maximize shareholder value, please visit ValueForCeragon.com.
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
1 Permission to use quotations from ISS was neither
sought nor obtained. Emphasis added.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/independent-proxy-advisory-firm-iss-recognizes-the-need-for-board-change-at-ceragon-to-ensure-a-more-fulsome-evaluation-of-strategic-alternatives-301603057.html
SOURCE Aviat Networks, Inc.