EXFO’s founder and majority shareholder Germaine Lamonde intends to take the company private despite an offer from VIAVI Solutions to acquire the company.
On June 7, EXFO announced it entered into an agreement under which a corporation controlled by Lamonde will acquire all outstanding shares of EXFO stock not already owned by Lamonde. The company stated that as of June 7, Lamonde controls 14.22% of issued and outstanding subordinate voting shares, and 100% of issued and outstanding multiple voting shares—representing collectively 61.46% of the corporation’s issued and outstanding shares—as well as 93.53% of the voting rights attached to all issued and outstanding shares. The agreed-to price on June 7 was US$6 per subordinate voting share, which represents a 62% premium to the closing price on June 4 and a 63% premium on the 20-day volume-weighted average trading price.
At the time Lamonde said the agreement will ensure “the long-term success of EXFO as a private company for its employees, business partners and all other stakeholders.” He added that his objective is to continue working with EXFO’s management team and employees globally, and maintain the company’s headquarters in Quebec City.
On June 16 VIAVI Solutions announced it proposed to EXFO’s board to acquire all outstanding subordinate voting shares and multiple voting shares at a price of US$7.50. VIAVI said the proposal values the company at approximately US$430 million.
“There are clear strategic merits for combining VIAVI and EXFO to build the leader in communications test and measurement for the next decade,” VIAVI said, adding that it “intends to continue EXFO’s brand and legacy, recognizing EXFO’s strong reputation built on years of quality product development, engineering excellence and customer service, and continue EXFO’s presence and operations in Quebec to complement and expand upon VIAVI’s long-standing engineering and product development teams in Quebec and Ottawa.”
Lamonde responded the same day with a statement saying the June 16 offer from VIAVI was the company’s third such effort, “after its first and second attempts in November 2020 at a price of US$4.75 and in May 2021 at a price of US$5.25, respectively.” Lamonde further stated, “I will not consider any alternative change of control transaction of EXFO, such as the one proposed by VIAVI, and my shares are not for sale … I want to be crystal clear for the benefit of EXFO’s shareholders and other stakeholders: either the proposed transaction that I made at US$6.00 and that was announced on June 7, 2021 is accepted by shareholders or, should EXFO’s shareholders not support this transaction, EXFO will continue its life as a public company. I believe wholeheartedly in the prospects of EXFO as a standalone company and I have no intention of changing the current operations of EXFO, including the location of its head office in Quebec City.”
Separately, on June 17, EXFO issued a statement informing, “Consistent with its fiduciary duties, EXFO’s board of directors, with Mr. Germaine Lamonde and Mr. Philippe Morin [the company’s chief executive officer] having recused themselves from the meeting, reviewed and diligently considered [VIAVI’s] proposal along with the special committee and their advisors. The unambiguous statement by the controlling shareholder that he rejects the proposal led EXFO’s board of directors to conclude that it will not pursue the proposal as it is not capable of being completed.”
VIAVI Solutions responded to EXFO’s and Lamonde’s statements, on June 17, with: “We are extremely disappointed that, without engaging us, Mr. Lamonde and the EXFO special committee quickly rejected our superior proposal to acquire EXFO for US$7.50 per share, all-cash. We reiterate our proposal to the EXFO board, which we continue to believe offers compelling value to EXFO shareholders, including Mr. Lamonde, and is in the best interest of EXFO stakeholders. VIAVI stands ready to engage with Mr. Lamonde and the EXFO special committee in order to reach a definitive agreement to implement a transaction.”
In EXFO’s original announcement of the going-private agreement on June 7, the company said it expects the deal to close no later than September 30, 2021.