Viavi announces proposal to acquire EXFO and Lamonde’s clarification

Viavi Solutions Inc. announced today that it has submitted a proposal to the board of directors of EXFO Inc. to acquire all of the outstanding subordinate voting shares and multiple voting shares of EXFO at a price of US$7.50 (C$9.14 at yesterday’s exchange rate) in cash per share.  The Proposal values EXFO at approximately US$430 million (C$524 million at yesterday’s exchange rate) on an undiluted basis, and represents a significant premium of:

In addition, VIAVI’s Proposal is at the exact high end of the US$5.75 to US$7.50 formal valuation range of EXFO’s subordinate voting shares prepared by TD Securities Inc., acting as the independent valuator in connection with the Going Private Transaction.

There are clear strategic merits for combining VIAVI and EXFO to build the leader in communications test and measurement for the next decade. The strength of the combined teams and technology, combined with significantly greater scale and financial resources, would enable strong investment in growth while achieving greater operating leverage than either company could do alone. VIAVI values the expertise, skills and experience of the EXFO key employee talent and believes their retention and continued commitment is critical to the success of the combination. VIAVI 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.

VIAVI’s board of directors has unanimously approved the Proposal, and no VIAVI shareholder vote will be required for the transaction. In addition, the transaction will not be subject to any financing condition. VIAVI reported cash and cash equivalents of US$672 million for the quarter ending April 3, 2021.

According to EXFO’s press release announcing the Going Private Transaction, EXFO’s majority shareholder, Germain Lamonde, has advised the special committee of the EXFO board that he would not consider any alternative change of control transaction.  However, VIAVI believes its Proposal offers compelling value to all EXFO shareholders, including Mr. Lamonde.

We are confident that the EXFO board of directors will agree that:

• the Proposal is considerably more attractive to EXFO shareholders than the Going Private Transaction; and
• the Proposal would reasonably be expected to constitute a “Superior Proposal” under the terms of the Arrangement Agreement for the Going Private Transaction.

Clarification from Germain Lamonde

“As the controlling shareholder of EXFO Inc., I want to provide absolute clarity for stakeholders regarding my intentions in response to the recent unsolicited proposal to acquire EXFO by Viavi Solutions Inc. and any further proposal to be made by Viavi or any other third party.

This is the third time that Viavi has made an offer to acquire EXFO, 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. On both occasions, I have indicated clearly to the board of directors of EXFO that, as the controlling shareholder of EXFO, I would not consider any transaction with Viavi and the board consequently concluded that there was no merit in pursuing any discussions with Viavi and did reiterate today to the board that, for the third time, Viavi’s non-binding proposal would not obtain my support as the controlling shareholder.

For a number of years, I was regularly contacted by shareholders expressing concern over the trading price and liquidity of EXFO’s shares. Having considered from time to time whether it would be more beneficial for the Corporation’s medium and long term prospects to operate as a private company, and considering the concerns expressed by shareholders, I stand by the merits of the transaction by plan of arrangement that I initiated which was announced on June 7, 2021 at a price of US$6.00 per share in cash. As I have previously indicated numerous times to the board of EXFO, as a controlling shareholder, 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 have founded EXFO and been involved in the company over the last 35 years and I believe that the business is well-managed, growing, strategically positioned for the evolving and dynamic future of the communications test and measurement industry.

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 stand-alone company and I have no intention of changing the current operations of EXFO, including the location of its head office in Québec city.

I wish to remind shareholders of EXFO that the Proposed Transaction would provide them with immediate liquidity at a 63% premium to the 20-day volume-weighted average trading price for the Subordinate Voting Shares on the Nasdaq Global Select Market for the period ending on June 4, 2021, the last trading day prior to the date of the announcement of the Proposed Transaction.”

CT Bureau