Proposal represents 51% premium to 60-day
volume weighted average trading price of Ceragon stock
Would deliver immediate, significant value
substantially in excess of the value Ceragon can generate as a
stand-alone entity
As 5% shareholder Aviat calls for
extraordinary general meeting of Ceragon shareholders to elect new
directors to evaluate proposal
Schedules conference call for 7:00 p.m. ET on June 27,
2022 to discuss its compelling proposal
AUSTIN,
Texas, June 27, 2022 /PRNewswire/ -- Aviat
Networks, Inc. (NASDAQ: AVNW) ("Aviat"), the leading expert in
wireless transport solutions, today announced it has submitted a
nonbinding proposal to acquire all the outstanding shares of
Ceragon Networks Ltd. (NASDAQ: CRNT) ("Ceragon") that it does not
already own for $2.80 per share in
cash. Aviat holds more than 5% of Ceragon's outstanding shares as
of June 24, 2022, making it Ceragon's
third largest shareholder.
Under the terms of the proposal, which was delivered to
Ceragon's Board of Directors, Ceragon shareholders would receive
$2.80 per share in cash, providing
them with immediate and certain value. Aviat also remains open to
offering a portion of the consideration in Aviat stock to allow
shareholders the opportunity to participate in the significant
upside of the combined company. The proposal represents a
substantial premium of 34% to the closing price of Ceragon shares
on June 27, 2022 and a 51% premium to
the 60-day volume weighted average trading price of Ceragon shares
as of June 24, 2022.
"Over the past year, we have sought to engage on numerous
occasions with Ceragon's Board and management team to negotiate
terms for a transaction that we are confident would deliver
meaningful near- and long-term value for shareholders of both
companies," said Aviat President and CEO Peter Smith. "We have twice attempted to
reasonably address concerns voiced by Ceragon, and have met only
with delay and rejection. Along with Aviat's Chairman, I traveled
to Israel last week to meet in
person with Ceragon's Chairman, CEO, and a member of its Board.
They refused to engage with us in constructive discussions, instead
making further demands for unorthodox and off-market provisions
that seem intended only to delay, leaving us with no other option
but to make Ceragon shareholders aware of our proposal."
Aviat Chairman, John Mutch
emphasized, "Our Board of Directors has spent considerable time
analyzing the benefits of this combination and is unanimous in its
belief that such a transaction has clear strategic and financial
merits and creates a compelling opportunity to deliver meaningful
near- and long-term value."
Benefits of the Transaction
We believe the combination of Aviat and Ceragon will create a
leading global wireless transport specialist that is more efficient
and competitive, and better positioned to provide greater
innovation and service to their complementary customer bases.
- The overlap in portfolio and roadmap developments and different
areas of technology leadership mean the combined company will
experience significant cost reductions and an enhanced value
proposition, with increased volume to leverage in operations and
supply chain.
- Aviat expects to realize approximately $35 million of cost synergies from identified
SG&A and operational synergies.
- By combining the companies' innovative technologies and
building scale, the combined company will also be positioned for
revenue growth opportunities and benefit from improved purchasing
power in the growing wireless transport solutions market.
- Aviat and Ceragon have complementary product roadmaps, which
will enable greater innovation, expand revenue opportunities and
enhance addressable market capture. The combined company will have
lower R&D costs and greater capabilities to strengthen its
technology leadership and compete effectively with generalists
across all markets and verticals, with a stronger foundation for
diverse growth.
- Aviat and Ceragon customers will benefit from access to a wider
array of best-in-class hardware and software solutions in more
geographic locations. Existing and prospective customers will also
benefit from the combined company's enhanced R&D capabilities
and product innovation, with Aviat and Ceragon offering a highly
attractive integrated value proposition.
Smith added, "As an industry leader and innovator with a strong
track record of delivering significant value to our shareholders
and premium service to our customers, we strongly believe in the
value this transaction would create and look forward to giving
Ceragon shareholders the opportunity to benefit from this
combination. We believe they will recognize that our proposal
provides compelling, immediate and certain value, substantially in
excess of the value that would be generated for Ceragon
shareholders if Ceragon were to remain a stand-alone entity.
Although we very much prefer to negotiate a transaction with
Ceragon on a friendly basis, we are prepared to take all steps
necessary to pursue this transaction."
As announced in a separate press release today, as the holder of
over 5% of Ceragon's shares, Aviat has called for an extraordinary
general meeting of Ceragon shareholders for the purpose of
increasing the size of the Ceragon board, removing three of
Ceragon's current directors, and electing independent,
well-qualified new board leadership that would evaluate fairly the
proposal and negotiate for the best outcome for Ceragon's
shareholders.
Transaction Details
Aviat intends to fund a transaction with Ceragon through cash on
hand and debt financing from one or more relationship banks. If
pursued, the transaction is expected to close within four to six
months after successful board refreshment and negotiation of a
definitive agreement, pending satisfaction of customary closing
conditions, including Ceragon shareholder approval and regulatory
approvals in various jurisdictions.
Vinson & Elkins LLP and Meitar are serving as legal advisors
to Aviat and Okapi Partners is serving as proxy solicitor.
The full text of the letter delivered to Ceragon on June 27, 2022 (June 28,
2022 Israel Time) is included below:
June 28, 2022
Mr. Zohar Zisapel, Chairman of the Board
Mr. Doron Arazi, Chief Executive
Officer
Ceragon Networks Ltd.
24 Raoul Wallenberg Street,
Tel-Aviv 69719, Israel
Gentlemen:
As you are aware, we have sought to engage with you on
numerous occasions over the past year in a constructive dialogue
about Aviat acquiring all of the outstanding shares of Ceragon at a
meaningful premium for Ceragon shareholders. Our Board of
Directors has spent considerable time analyzing the benefits of
this combination and is unanimous in its belief that such a
transaction has clear strategic and financial merits and creates a
compelling opportunity to deliver meaningful near- and long-term
value for shareholders of both companies.
We are surprised and disappointed by your rejection of our
April proposal to acquire Ceragon for $2.80 per share in cash, which represents a
significant 51% premium to Ceragon's 60-day volume-weighted average
share price of $1.85 as of
June 24, 2022, and a 34% premium to
Ceragon shareholders based on the closing price on June 27, 2022 of $2.09. When you rejected our initial
November 21, 2021 proposal to acquire
Ceragon for $3.25 per share in cash,
your stated view was that our proposal was inadequate and that
external factors and yet-to-be-made-public internal initiatives
were impacting your short-term market price. Your stock price
performance in the seven and a half months since we made our
initial proposal to you contradicts such a view. Indeed, here
is a graph showing your stock performance since our initial offer,
which shows a steady decline:
Additionally, you have consistently refused to even engage
with us unless we obtained financing commitments and unless we
agreed that Aviat would pay you a substantial break-up fee if we
abandoned the transaction. In response, we provided you with
copies of highly confident letters from three well-regarded
financial institutions and agreed that we would have binding
commitment letters in place prior to signing. To address your
request on a break-up fee, we provided you with a detailed
framework as to how the transaction would be structured, including
noting that we would be willing to structure our transaction so
that Aviat would pay a termination fee in the unlikely event that,
despite the binding commitments, we were unable to consummate the
transaction due to the failure of our financing.
Last week, our Chairman and I traveled to Israel to meet with you in person in the hopes
of engaging constructively with you to find a mutually beneficial
transaction. However, you refused to engage in price
discussions, except to advise that you had not engaged a financial
advisor, and estimated it would take you at least two months to
thoroughly analyze our proposal. Rather than engaging with
us, you once again insisted on fully committed financing and stated
that Aviat would have to agree to pay a break-up fee if the
transaction failed to close for any reason that was not Ceragon's
"fault." You further advised that the Aviat break-up fee you were
seeking should be equal to the difference between the purchase
price and your current trading price, which at the time translated
to an outrageous ~$60 million on a
$235 million transaction, or roughly
25%. You also advised us that if Ceragon were to be presented
with a superior bid, Ceragon should be permitted to terminate the
agreement with Aviat without the payment of a termination fee,
which is contrary to market practice in such cases. We
believe your shareholders would agree that requiring such
unorthodox and off-market provisions as obstacles to discussions
and due diligence are not the sort of actions that fiduciaries
trying to maximize shareholder value would take when being offered
a 51% premium acquisition proposal.
Consequently, we are left with no choice but to take our
compelling proposal directly to your shareholders by making its
terms public. Given the substantial premium represented by
our proposal and the unique benefits of a combination with Aviat,
we are confident that Ceragon's shareholders will enthusiastically
embrace our proposal. We also want Ceragon's shareholders to
rest assured that we will have committed and binding financing
prior to signing the transaction agreement and we intend for this
transaction to be based on market precedents, including with
respect to the parties' respective remedies if the transaction is
terminated.
We believe that a combination of our two companies would
create a leading wireless transport specialist with the scale and
expertise to deliver superior performance to customers and
shareholders. By combining our businesses, we can further improve
our supply chain sourcing, increase operational efficiency, and
realize meaningful cost savings. Additionally, Ceragon's customer
base and geographic exposure is highly complementary to Aviat's.
Together, we can deliver a valuable set of technological expertise
and product breadth to customers around the world.
Absent this combination, we doubt that Ceragon's stock and
business performance will meaningfully change in the near-term.
Ceragon's current product offering lacks meaningful technological
differentiation, and even in areas where Ceragon does have
differentiation, the company lacks the management competence to
extract value. The company's gross margin has declined from 34% in
calendar year 2019 to 30% over the last twelve months.
Additionally, Ceragon's next generation chip has been delayed, and
given the supply challenges in the chip space, we see no reason to
believe why this product won't continue to slip in its delivery to
the market. Aviat's next generation System on Chip (partnership
with MaxLinear) is based on a newer generation of technology than
Ceragon's chip and we believe will offer significant
differentiation. Ceragon's chip development strategy is destroying
value to shareholders and will offer no technological advantage to
customers in the medium to long-term. Without our offer for and
stewardship of Ceragon's business, we do not expect to see
significant change in the company's stock performance nor its
operating results.
Accordingly, we believe our all-cash proposal provides
Ceragon shareholders with compelling, immediate and certain value,
which is substantially in excess of the value that would be
generated for Ceragon shareholders if Ceragon were to remain a
stand-alone entity. In addition, we remain open to
offering a portion of the consideration in Aviat stock should
you wish to provide the opportunity for your shareholders to share
in the upside potential of the combined company. We believe
that Ceragon shareholders would appreciate the strategic and
financial logic of the combination and the opportunity to
participate in its future.
In connection with delivering this proposal, we advise you
that we have acquired 4,233,757 shares of Ceragon, which represents
approximately 5.04% of the outstanding shares. As a larger
than 5% holder, we are requesting that Ceragon call an
extraordinary general meeting of its shareholders for the purposes
of increasing the size of the Ceragon board to nine, electing our
proposed independent nominees to those seats, and removing and
replacing three of Ceragon's current directors with our proposed
nominees. Based on your response to our proposals to date, we
believe the time has come for new board leadership that would
evaluate our proposal and negotiate for the best outcome for
Ceragon's shareholders.
As we have reiterated to you several times, we are committed
to a transaction with Ceragon. In connection with this
transaction, we have engaged Vinson & Elkins LLP and Meitar as
our legal advisors, and Okapi Partners as our proxy
solicitor. We stand ready to discuss next steps towards a
mutually beneficial negotiated transaction with you, as well as
your independent financial and legal advisors. As we have
stressed throughout the last year, we very much prefer to negotiate
a transaction with Ceragon on a friendly basis, whether with you or
with a revised board, but are prepared to take all steps necessary
to pursue this transaction on an expedited basis.
Sincerely,
Peter A. Smith
Aviat Networks
President and Chief Executive Officer
Conference Call
Aviat will host a conference call for investors and industry
analysts to discuss its proposal at 7:00
p.m. ET on June 27, 2022.
To listen to the live conference call, please dial toll-free at
1-877-830-2597 or the international dial-in at +1-785-424-1877 and
use the conference ID: "ANICALL" or the call title "Investor Update
Call". We ask that you dial-in approximately 10 minutes prior to
the start time. Accompanying slides will be available on Aviat's
investor relations website at the following address:
https://investors.aviatnetworks.com/.
A replay of the call will be available on the Aviat investor
relations website, or by dialing 800-938-1598 (Toll Free) or
402-220-1545 (Toll).
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, including, without limitations, Aviat's beliefs and
expectations regarding the proposed transaction between Aviat and
Ceragon and the results of the requested extraordinary general
meeting of shareholders of Ceragon. All statements, trend analyses
and other information contained herein regarding the foregoing
beliefs and expectations and other statements identified by the use
of forward-looking terminology, including, without limitation,
"anticipate," "believe," "plan," "estimate," "expect," "goal,"
"will," "see," "continue," "could, " "may, " "might, " "potential,"
"seek," "should," "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. Risks and uncertainties
that could cause actual results to differ materially from estimates
or projections contained in the forward-looking statements are
discussed in our Annual Reports on Form 10-K and our other filings
with the Securities and Exchange Commission.
The forward-looking statements included in this release are made
as of the date hereof and, except as required by law, Aviat
undertakes no obligation to update, amend, or clarify any
forward-looking statement to reflect events, new information, or
circumstances occurring after the date of this release.
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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SOURCE Aviat Networks, Inc.