Ramius
Sends Letter and Mails Consent Solicitation Statement to Orthofix
Shareholders
Monday
January 12, 8:00 am ET
Urges
Shareholders to Support Calling a Special Meeting to Elect Four New, Highly
Qualified Nominees to Replace Four Current Directors
Believes
Orthofix Should Explore a Potential Sale of Blackstone Medical, Explore
Opportunities to Reduce Costs, and Explore Any Other Value Enhancing
Alternatives That May Be Available
NEW
YORK--(BUSINESS WIRE)--RCG Starboard Advisors, LLC, a subsidiary of Ramius LLC,
together with their respective affiliates (the “Ramius Group”) today announced
that it has sent a letter and mailed a Consent Solicitation Statement to
shareholders of Orthofix International N.V. (“Orthofix” or the “Company”)
(Nasdaq: OFIX - News). Ramius, the beneficial owner of approximately 5.1% of the
Company’s outstanding common shares, is seeking to call a special general
meeting for the purpose of making substantial changes to the composition of
Orthofix’s Board of Directors. For more information on how to vote, as well as
other solicitation materials, please visit
www.ShareholdersForOrthofix.com.
In the
letter, Ramius urges shareholders to support the call for a special meeting in
order to elect four new, highly qualified individuals -- J. Michael Egan, Peter
Feld, Steven J. Lee and Charles T. Orsatti (the “Nominees”) -- to replace four
current members of Orthofix’s ten-member Board. Ramius’ Nominees form an
experienced team that possesses the fortitude, skill set and experience to
maximize value for all Orthofix shareholders.
Ramius
Partner Jeffrey C. Smith stated, “Orthofix is at a critical juncture and we
believe it is imperative for shareholders to support our proposal to call a
special meeting. Due to the ill-conceived and poorly executed acquisition of
Blackstone Medical in 2006, the Company faces significant operating losses and a
highly-levered balance sheet with debt covenants that begin to tighten in late
2009. The shareholders of Orthofix deserve better representation and we believe
that it is necessary to act now in order to prevent further erosion of
shareholder value.”
The full
text of the letter follows:
January
12, 2009
Dear
Fellow Orthofix Shareholder:
SUPPORT
OUR EFFORTS TO CALL A SPECIAL MEETING OF ORTHOFIX SHAREHOLDERS
RCG
Starboard Advisors, LLC, a subsidiary of Ramius LLC, together with their
respective affiliates (the “Ramius Group”), is seeking your support to call a
Special General Meeting of Shareholders (the “Meeting”) of Orthofix to elect
four new, highly qualified individuals -- J. Michael Egan, Peter Feld, Steven J.
Lee and Charles T. Orsatti (the “Nominees”) -- to replace four current members
of Orthofix’s ten-member Board. The Nominees are independent from Orthofix and
possess the fortitude, skill set, and experience, to maximize value for all
Orthofix shareholders. We believe this change is essential now to
preserve and enhance the value of the shareholders’ investment in Orthofix.
We believe the current Board of
Directors (“Board”) has failed spectacularly in its oversight of Orthofix and we
have serious concerns regarding the future performance and financial stability
of the Company under its direction.
As
significant shareholders who currently own approximately 5.1% of the Company’s
outstanding shares, the Ramius
Group’s interest to preserve and enhance shareholder value is fully aligned with
fellow shareholders.
PROMPT,
DECISIVE ACTION IS REQUIRED IMMEDIATELY
TO ENSURE THE FUTURE SUCCESS OF ORTHOFIX
Orthofix is at a critical
juncture. We believe it is critical for shareholders to support our
proposal to call the Meeting as opposed to waiting to act at the annual meeting,
which may not be held for several months. Due to the ill-conceived and poorly
executed acquisition of Blackstone Medical (“Blackstone”) in 2006, the Company
faces significant operating losses from Blackstone and a highly-levered balance
sheet with debt covenants that begin to tighten in late 2009. In order to remain
in compliance with these covenants, the Company must significantly improve
EBITDA or make substantial debt repayments. If immediate action is not taken and
the Company continues to generate substantial losses at Blackstone, it is
possible that Orthofix may breach a covenant, which could cause further damage
to the Company.
ORTHOFIX’S
CAPITAL STRUCTURE IS PRECARIOUS AND INACTION COULD RESULT IN FURTHER DAMAGE TO
THE COMPANY
In
October 2008, the Company was forced to seek an amendment to the terms of its
credit facility due to probable non-compliance with the Debt / Last Twelve Month
EBITDA covenant (“EBITDA covenant”). As a result of the amendment, the interest
rate increased from LIBOR +175 basis points to LIBOR +450 basis points. We
estimate that this increase in interest rate will cost the Company an additional
$8 million per year in addition to the one-time amendment fee of $1.5
million.
It is
important to recognize that this amendment only provides covenant leniency for a
short time. Beginning in the third quarter of 2009, the EBITDA covenant begins
to tighten from the current level of 4.0x Debt / EBITDA down to 2.5x Debt /
EBITDA in the third quarter of 2010 and beyond. The current Debt / EBITDA ratio
as of the third quarter of 2008 was 3.6x. In order for Orthofix to remain in
compliance with the EBITDA covenant, the Company must significantly
improve EBITDA or reduce debt well beyond the recently announced debt repayment
of $10 million.
THE
ANNOUNCED RESTRUCTURING INITIATIVES AT BLACKSTONE ARE WHOLLY INADEQUATE AND A
SALE OF BLACKSTONE SHOULD BE EXPLORED PRIOR TO FURTHER INTEGRATION INTO
ORTHOFIX
We do not
believe that the recently announced initiatives to restructure Blackstone at a
cost of $4.2 million in order to save $5 million per year beginning in 2011 come
anywhere close to being adequate to reverse the negative trends in operating
performance. These initiatives at Blackstone call for further integration of
that business into the core businesses of Orthofix which could make it more
difficult to separate if Blackstone is sold. Before spending significant cash
and resources to integrate this troubled business into the core businesses, we
believe it makes sense to first explore options to sell Blackstone. However,
management and the Board appear committed to these actions which, we believe,
will make it more difficult to sell Blackstone as a separate business. We believe it is prudent for
shareholders to act now to help us call the Meeting before Orthofix takes
further steps to integrate Blackstone into the core
businesses.
WE
BELIEVE ORTHOFIX SHOULD IMMEDIATELY
EXPLORE AND EXECUTE A SALE OR DISPOSITION OF BLACKSTONE AT THE HIGHEST POSSIBLE
PRICE
A sale of Blackstone and a reduction
in corporate overhead expenses, which have nearly doubled since the acquisition
of Blackstone, will position Orthofix to remain in compliance with its debt
covenants, to begin repaying the debt, and to significantly improve shareholder
value. Given the Company’s depressed share price, we believe it is
unacceptable for management and the Board to explore other, highly dilutive
financing options such as equity or convertible offerings to address the
leverage issue when other non-dilutive options, such as a sale of Blackstone,
are available.
By
exploring and executing a sale of Blackstone at the most favorable price
possible and reducing corporate overhead, Orthofix could reduce debt, improve
consolidated EBITDA and Free Cash Flow, significantly reduce the risk of a
covenant default, and position the Company for future success.
RAMIUS
NEEDS YOUR SUPPORT TO CALL A SPECIAL MEETING TO GIVE YOU THE OPPORTUNITY TO
ELECT SKILLED DIRECTORS COMMITTED TO MAXIMIZING SHAREHOLDER VALUE
Under the
supervision of the current Board, Orthofix has significantly underperformed. The
Company faces substantial challenges for 2009 and beyond in large part due to
the actions the current Board has taken over the last several years. A vast
majority of the current Directors were on the Board prior to the acquisition of
Blackstone. The current Board voted to approve the Blackstone deal, approve the
operating plan, approve the incurrence of $300 million in debt to fund the
acquisition, and have recently approved the announced restructuring initiatives,
which we believe fall well short of the actions that are necessary to remedy the
situation. Ask yourself if
these are the Directors you want representing you?
As shareholders, we do not believe
you should count on the same individuals who put the Company in this position to
remedy the situation. It is critical for the Company to be governed by a
Board that has fresh perspectives and new ideas on how to create value for
shareholders. Ramius’ Nominees are well-qualified and eager to contribute to the
future success of Orthofix. Despite what the Company may tell you, time is of
the essence. The additional costs to the Company and to the Ramius Group related
to the Meeting pale in comparison to the benefits that could accrue to
shareholders if the appropriate actions are taken to ensure the long-term health
and prosperity of Orthofix. If elected, the Nominees would be supportive of
actions to explore a potential sale of Blackstone, explore opportunities to
reduce costs, and explore any other value enhancing alternatives that may be
available. The Nominees, if
elected, would work constructively with the remaining members of the Board to
maximize value for all shareholders.
WE
URGE SHAREHOLDERS TO ACT NOW! COMPLETE AND RETURN THE WHITE REQUEST CARD
TODAY
Remember, your support to call the
Meeting in no way commits you to vote to remove and replace the four current
Orthofix Directors with our Nominees. If we are successful in calling the
Meeting, we look forward to sharing additional insight and analysis with you
when we file our proxy materials for the Meeting.
Please do
not sign any BLUE
revocation cards from the Company, and please DISCARD them. If you have
already signed the Company’s card, you may revoke it by delivering a later-dated
WHITE request card in
the enclosed postage-paid envelope or voting by telephone or the Internet as
described on the enclosed WHITE
request card. Only your latest dated, executed vote counts.
For
additional information, we would refer you to our previously disclosed letter to
shareholders dated December 3, 2008, which is available through EDGAR at
www.sec.gov. A copy of the letter, as well as more information about this
process, is available at www.ShareholdersForOrthofix.com.
We thank
you for your support.
/s/
Jeffrey C. Smith
Jeffrey
C. Smith
Partner,
Ramius LLC
WE
URGE YOU TO SIGN AND RETURN YOUR WHITE MEETING REQUEST CARD TODAY.
IF
YOU HAVE ANY QUESTIONS ABOUT THE MEETING REQUEST,
PLEASE
CONTACT THE FIRM ASSISTING US IN THIS SOLICITATION:
INNISFREE
M&A INCORPORATED TOLL-FREE AT: (888) 750-5884
BANKS AND
BROKERS PLEASE CALL COLLECT: 212-750-5833
About
Ramius LLC
Ramius
LLC is a registered investment advisor that manages assets in a variety of
alternative investment strategies. Ramius LLC is headquartered in New York with
offices located in London, Tokyo, Hong Kong, Munich, and Vienna.
CERTAIN
INFORMATION CONCERNING PARTICIPANTS
Ramius
Value and Opportunity Master Fund Ltd (“Value and Opportunity Master Fund”),
together with the other participants named herein, has filed a definitive
solicitation statement and an accompanying WHITE request card with the
Securities and Exchange Commission (“SEC”) to be used to solicit written
requests from shareholders of Orthofix International N.V., a limited liability
company organized under the laws of the Netherlands Antilles (the “Company”), to
call a special general meeting of the Company for the purpose of seeking to
remove and replace certain directors of the Company.
If
successful in their solicitation of written requests to call the special general
meeting, the participants intend to file and disseminate a separate proxy
statement and proxy card relating to proposals to be voted upon at the special
general meeting.
VALUE AND
OPPORTUNITY MASTER FUND ADVISES ALL SHAREHOLDERS OF THE COMPANY TO READ THE
DEFINITIVE SOLICITATION STATEMENT AND OTHER SOLICITATION MATERIALS AS THEY
BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION. SUCH MATERIALS ARE
AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
THE PARTICIPANTS IN THE CONSENT SOLICITATION WILL PROVIDE COPIES OF THE
DEFINITIVE SOLICITATION STATEMENT WITHOUT CHARGE UPON REQUEST. REQUESTS FOR
COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR, INNISFREE
M&A INCORPORATED, AT ITS TOLL-FREE NUMBER: (888) 750-5884.
The
participants in the proxy solicitation are Value and Opportunity Master Fund,
Ramius Enterprise Master Fund Ltd (“Enterprise Master Fund”), Ramius Advisors,
LLC (“Ramius Advisors”), RCG Starboard Advisors, LLC (“RCG Starboard Advisors”),
Ramius LLC (“Ramius”), C4S & Co., L.L.C. (“C4S”), Peter A. Cohen (“Mr.
Cohen”), Morgan B. Stark (“Mr. Stark”), Thomas W. Strauss (“Mr. Strauss”),
Jeffrey M. Solomon (“Mr. Solomon”), Peter A. Feld (“Mr. Feld”), J. Michael Egan
(“Mr. Egan”), Steven J. Lee (“Mr. Lee”) and Charles T. Orsatti (“Mr.
Orsatti”).
As of the
date of this filing, Value and Opportunity Master Fund beneficially owns 765,045
shares of Common Stock of the Company. RCG Starboard Advisors, as the investment
manager of Value and Opportunity Master Fund, is deemed to be the beneficial
owner of the 765,045 shares of Common Stock of the Company owned by Value and
Opportunity Master Fund.
As of the
date of this filing, Enterprise Master Fund beneficially owns 106,935 shares of
Common Stock of the Company. Ramius Advisors, as the investment advisor of
Enterprise Master Fund, is deemed to be the beneficial owner of the 106,935
shares of Common Stock of the Company owned by Enterprise Master
Fund.
Ramius,
as the sole member of each of RCG Starboard Advisors and Ramius Advisors, C4S,
as the managing member of Ramius, and Messrs. Cohen, Stark, Strauss and Solomon,
as the managing members of C4S, are each deemed to be the beneficial owners of
the 765,045 shares of Common Stock of the Company owned by Value and Opportunity
Master Fund and the 106,935 shares of Common Stock of the Company owned by
Enterprise Master Fund. Messrs. Cohen, Stark, Strauss and Solomon share voting
and dispositive power with respect to the shares of Common Stock of the Company
owned by Value and Opportunity Master Fund and Enterprise Master Fund by virtue
of their shared authority to vote and dispose of such shares of Common
Stock.
As of the
date of this filing, none of Messrs. Feld, Egan, Lee or Orsatti directly own any
shares of Common Stock of the Company.
As
members of a “group” for the purposes of Rule 13d-5(b)(1) of the Securities
Exchange Act of 1934, as amended, each of the participants in this solicitation
is deemed to beneficially own the shares of Common Stock of the Company
beneficially owned in the aggregate by the other participants. Each of the
participants in this proxy solicitation disclaims beneficial ownership of such
shares of Common Stock except to the extent of his or its pecuniary interest
therein.
Contact:
Media
& Shareholders:
Sard
Verbinnen & Co
Dan
Gagnier/ Renée Soto/Jonathan Doorley
212-687-8080
Source:
RCG Starboard Advisors, LLC