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. 11, 2022 /PRNewswire/ -- Aviat
Networks, Inc. (NASDAQ: AVNW) ("Aviat"), the leading expert in
wireless transport solutions, today issued the following open
letter to shareholders of Ceragon Networks Ltd. (NASDAQ: CRNT)
("Ceragon" or the "Company") to correct the latest false claims and
mischaracterizations made by Ceragon's Board of Directors ("Board")
in its August 8, 2022 letter to
shareholders.
Dear fellow Ceragon shareholders,
Aviat has given the Board many opportunities to consider and
negotiate a transaction that would provide shareholders like you
immediate value at a significant premium. Rather than engage in
fruitful discussion, the Board has delayed, deferred and attempted
to distract you with a series of false and misleading arguments
designed to disguise their persistent failure to deliver value.
Earlier this week, the Board rejected Aviat's revised proposal to
acquire Ceragon for $3.08 per share
in cash and stock, in another letter that distorts the record and
which is replete with false claims and mischaracterizations. We're
writing to you today to once again set the record straight.
THE PROPOSED TRANSACTION WOULD DELIVER SIGNIFICANT VALUE TO
SHAREHOLDERS, IN EXCESS OF WHAT CERAGON CAN ACHIEVE THROUGH ITS
CURRENT STRATEGY, AND WITH SUBSTANTIALLY LESS EXECUTION
RISK.
- Aviat's revised proposal represents a substantial premium of
47% to the closing price of Ceragon shares on June 27, 2022, of $2.09 (the last close price prior to Aviat's
first public offer) and a 64% premium to Ceragon's 60-day
volume-weighted average share price of $1.88.
- Analysts' price targets reflect what Ceragon could
achieve at some point in the future. However, following several
quarters of operational challenges, a rising debt load, negative
EPS and cash flow, and a botched chip rollout, we see these targets
as, at best, highly aspirational. If Ceragon were to combine with
Aviat, it would have the management, discipline, resources and
broader platform to achieve its full potential.
- Ceragon lowered its annual guidance in the first quarter of
2022, and in the second quarter it missed top line consensus,
continuing its pattern of underperformance, having missed
analysts' consensus earnings expectations for five of the last ten
quarters. Continued performance at these woeful levels will
lead to analyst price target reductions.
- While Ceragon touts its progress in North America, industry league tables list
Aviat as the number one player in North
America, with Ceragon not even among the top
three.1
- In its August 8 report,
independent proxy advisory firm Institutional Shareholder Services
("ISS") noted that Ceragon, "underperformed peers and the Nasdaq
index over all measurement periods ended on the unaffected date…
While revenue growth deceleration has also been an issue at peers,
the Company's gross margins are below pre-pandemic levels and have
not shown signs of recovery over the past several
quarters."2 ISS is an independent shareholder advisory
service whose recommendations are relied upon by thousands of
institutional investors.
Results like these are what Ceragon's Board expects you to
believe is "strong business momentum." Since the beginning of 2019,
Ceragon has incurred negative free cash flow of $48 million as it has attempted to produce its
much-delayed next generation chip, and this burn rate has
accelerated as the company has consumed $35
million of the $48 million in
just the last 18 months. We believe that this 28-nanometer chip,
when it is finally rolled out, will consume more power and create
cost, system design, and supply chain challenges. Ceragon's
debt-laden balance sheet will not support the expensive redesign
needed to address these problems, which we fear could
lead this entrenched Board to raise additional capital through a
dilutive equity offering.
The truth is that Ceragon is struggling on its own, and is
not going to achieve outlandish price targets, or even its own
projections. We continue to believe that Ceragon would see
tremendous advantages from being part of a larger platform with
more scale and resources as part of Aviat. In fact, ISS noted that
a "lack of clear progress" could send Ceragon's stock lower in the
absence of a transaction, including one with Aviat.
THE CERAGON BOARD HAS DONE VIRTUALLY NOTHING TO EXPLORE (AND
EVERYTHING POSSIBLE TO PREVENT) A POTENTIAL TRANSACTION WITH AVIAT
OR TO MAXIMIZE VALUE FOR ALL SHAREHOLDERS.
Despite Ceragon's claims to the contrary, the Board has
repeatedly erected roadblocks to exploring a value creating
transaction with Aviat at any price, even declining to name
their own price when offered the opportunity. Instead, they
indicated it would take two months to determine a price, which is
not what would reasonably be expected from a party genuinely
interested in "maximizing shareholder value" – and which is grossly
inconsistent with how quickly they rejected both our original and
revised public offers. ISS said that "it is questionable to what
extent the board has been open to negotiating a deal," and that the
Board "does not appear to have engaged in detailed
discussions."
We have been crystal clear since making our offer public on
June 27 that our very strong
preference is to negotiate a mutually agreeable transaction with
Ceragon, and we have always believed that eventually they would
come to the bargaining table. Unfortunately, since June, Ceragon
has spent less than 30 minutes total in dialogue with Aviat,
preferring instead to spend their time coming up with specious
objections like demanding a reverse termination fee (payable from
Aviat to Ceragon if a mutual definitive agreement was entered into
but could not be closed) that was both unorthodox and outrageously
high (~$60 million) as a prerequisite
for discussions; complaining that our proposed reverse termination
fee was too low, when in fact all we proposed is that it be based
on market standards; or demanding that Aviat agree that Ceragon
would not have to pay a termination fee (in the event someone else
proposed to buy them after they executed a definitive agreement
with Aviat).
What we now recognize is that this Board cannot come to its
senses, because the Board lacks the necessary independence to do
the right thing for shareholders.
CERAGON SHAREHOLDERS DESERVE A CHANCE FOR GREATER VALUE. THE
ZISAPEL BLOC ON THE CERAGON BOARD IS THE PROBLEM. REPLACING A
MAJORITY OF THE BOARD IS THE SOLUTION.
Three members of Ceragon's seven-seat Board are closely tied to
a fourth director, the Company's Chairman, Zohar Zisapel, and serve
on boards or as executives of other companies he controls. Since
their other business interests are closely tied to him, it is easy
to understand why these directors would support Mr. Zisapel's
interests over those of other Ceragon shareholders. ISS said that
"investors may question to what extent they would challenge the
company's chairman/co-founder." Together this bloc provides Mr.
Zisapel with effective majority control of the Board.
Please note that although Mr. Zisapel founded Ceragon, he
neither owns nor controls the majority of voting shares. In fact,
in February 2021, he sold
approximately one-third of his Ceragon shares, when the stock was
trading at over $5.00 per share, well
above where it has traded since, and has not replenished his
position since, showing little confidence in Ceragon's future.
The Zisapel bloc has presided over considerable destruction
of shareholder value:
- Former Ceragon CEO Ira Palti
oversaw total shareholder return of -21% during his tenure as CEO
of Ceragon versus Russell 2000 TSR of 323% during the same period.
That is an underperformance of 343%. ISS agrees that Ceragon has
underperformed under Mr. Palti's leadership and recommends that
shareholders vote FOR his removal from the Board.
- Yael Langer, who is currently employed by Mr. Zisapel, has been
on the Ceragon Board since 2000, presiding over consistent
underperformance. ISS also recommends that shareholders vote FOR
Ms. Langer's removal from the Board to bring a fresh view to
Ceragon's challenges.
- Mr. Zisapel himself has watched Ceragon's stock price decline
by 87% over the 22 years since he took Ceragon public in
August 2000. He has been Chair for
every one of those 22 years.
- David Ripstein was previously
employed by Mr. Zisapel, and is CEO of another company that demands
considerable time and attention, which leads us to fear he would be
quick to defer to Mr. Zisapel and Mr. Palti.
As the Board of a publicly traded company, Ceragon's
directors should represent the interests of all shareholders, not
just Mr. Zisapel.
A VOTE FOR ALL OF AVIAT'S FIVE DIRECTOR NOMINEES ON THE GOLD
PROXY CARD IS THE PATH TO CREATING GREATER BOARD INDEPENDENCE AND
GREATER SHAREHOLDER VALUE.
All five of our nominees are thoroughly independent – from Aviat
itself, from Ceragon's management and, perhaps most importantly,
from Mr. Zisapel – and able to provide a fresh, unbiased
perspective at a critical junction for Ceragon. No matter what
Ceragon tries to allege, when elected, all five of Aviat's
nominees would honor their fiduciary responsibility to maximize
shareholder value and evaluate and oversee fairly not just our
proposal to acquire Ceragon but also any other path to value
creation.
To set the record straight on one of Ceragon's most outlandish
red herrings, Aviat director nominee Jonathan Foster has the public company board
experience to be an immediate asset to the Ceragon Board. Serving
today on four other public company boards, service on Ceragon's
Board would not make him over-boarded according to the criteria of
either ISS or proxy advisory firm Glass Lewis, both of which
consider a director over-boarded only if they serve on six or more
boards concurrently. Ceragon has also used cherry-picked dates in
an attempt to distort the record of another Aviat director nominee,
Dennis Sadlowski, who as first a
board member and then CEO of CECO Environmental Corporation helped
that company significantly reduce its debt, strengthen its
leadership team and implement strong processes and overall
operational rigor.
As usual, the Ceragon Board is trying to make issues where none
exist, hoping you'll excuse them for refusing to engage in
discussions regarding a combination with Aviat that would yield a
significant premium for shareholders and provide a more effective
platform for its technologies. Only by voting FOR Aviat's
proposal to remove three entrenched Ceragon directors and
FOR the election of ALL FIVE of Aviat's nominees on
the GOLD proxy card TODAY can shareholders realize
the considerable value of this combination.
YOUR VOTE IS CRUCIAL. Please visit ValueForCeragon.com
for more information.
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
____________________
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1 Source: Skylight
Research
|
2 Permission to use
quotations from ISS was neither sought nor obtained.
|
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SOURCE Aviat Networks, Inc.