BOSTON, Mar 21, 2009 (BUSINESS WIRE) -- Orthofix International N.V. (NASDAQ: OFIX) (the Company) today urged
shareholders to reject the proposals put forth by Ramius in their
ongoing proxy contest. Earlier this week, the independent proxy advisory
firm PROXY Governance, Inc. recommended that shareholders reject each of
the activist hedge fund's proposals, stating "The problem with the
dissident campaign is not an inability to evaluate what went wrong, but
the profound absence of a plan to effect a credible recovery."
Another proxy advisory firm, RiskMetrics Group (RMG), made a split
recommendation in favor of three of the four Ramius nominees. This is a
common practice for RMG, which noted in their report that "the burden of
proof on the dissidents is lower." Whereas PROXY Governance found "the
profound absence of a plan" to be a major factor that shareholders
should weigh in evaluating Ramius' proposals, RMG appeared to hold the
dissident shareholder to a lower standard. In their report, RMG stated
they "will not require from the dissidents a detailed plan of action,
nor will we require that their plan is preferable to the incumbent plan."
In assessing Ramius' key concerns RMG's report stated:
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"Though Ramius has voiced concerns about the company's ability to meet
its debt coverage ratios given poor performance at the Blackstone
division, the company does not seem to be in any imminent danger of
violating its covenants....Moreover, the fact that the company has
generated positive operating cash flow in each of the last five years
mitigates the risk of violating leverage ratios as the company can
repay debt by curtailing investment activities, if needed."
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"Orthofix's G&A and corporate overhead costs as percentage of revenue
have remained largely unchanged since the Blackstone acquisition in
2006."
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"Also while Ramius had initially advocated for the immediate sale of
the Blackstone division, analysts seems to be more supportive of the
turnaround plan rather than an immediate sale."
Orthofix also expressed significant concern with RMG's recommendation to
remove the Chairman of the Company's Board while at the same time
recommending the nomination of Peter Feld. RMG's report acknowledged
that "Peter Feld has the least company/sector experience" of the Ramius
nominees while appearing to be unmoved by Orthofix's previously
announced concerns regarding factual errors in Ramius' publicly released
summary of the Company Chairman's background and experience.
Mr. Feld is a 30-year-old employee at Ramius who has no health care or
operating experience. The Company is also concerned that Mr. Feld's
previous experience on the boards of two public companies appears to be
disconcertingly thin and unproductive. At the same time, RMG has
recommended that shareholders remove the Chairman of the Company's
Board, James Gero. Mr. Gero has served on Orthofix's Board for the last
14 years, and has overseen the key changes made at the Company resulting
in the positive improvements acknowledged in RMG's own report.
"RMG notes the progress we have made in key areas, and acknowledges
recent indications of shareholder and industry analyst support for our
turnaround plan. But, at the same time they are recommending that our
shareholders remove members of our Board who have presided over and led
this turnaround plan, and replace them with individuals who we believe,
in at least one case, would bring far less relevant experience and value
to our Board. As such, the recommendations RMG make in their report seem
inconsistent with their acknowledgement of the progress we have made,"
stated Alan Milinazzo, President and CEO of Orthofix.
Mr. Milinazzo concluded by saying, "We are pleased with the feedback we
have received from shareholders who understand this market well and the
supportive recommendation issued by PROXY Governance."
Recent Positive Announcements by Orthofix
In contrast to Ramius' lack of "specific strategies" for Orthofix, the
current Board of Directors and management team have put a sound strategy
in place that is showing progress and improved performance at
Blackstone. On February 12, the Company released its full year 2008
results and 2009 guidance, showing substantial improvement in the
operating performance of the spinal implant and biologic business,
including increased revenue, a higher gross profit margin and lower
adjusted operating expenses. These encouraging results followed a number
of other recent positive developments, including:
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On February 11, 2009, Orthofix announced the acceleration of the
launch date of Trinity(R) Evolution(TM), the next generation adult stem
cell-based allograft developed in collaboration with the
Musculoskeletal Transplant Foundation (MTF). The limited market
release is now expected to occur by May 1st of this year, two months
ahead of schedule. This development followed a December 15, 2008
announcement that Orthofix and MTF had achieved a major development
milestone, which was also ahead of schedule.
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Orthofix also initiated the limited market release of two new
products, the Firebird(TM) pedicle screw system and the PILLAR(TM) SA
interbody device, both of which are expected to be fully launched in
the first quarter of 2009.
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In December 2008 Orthofix made a $10 million partial debt repayment,
ahead of the scheduled maturity date. At December 31, 2008 our
debt-to-EBITDA ratio as defined in our amended credit facility was 3.4
versus the maximum allowable ratio of 4.0. This gave us approximately
$49 million of available debt capacity at December 31, 2008. When the
maximum allowable debt-to-EBITDA ratio decreases to 3.5 at September 30th
of this year, we expect the last 12 months' total EBITDA used in the
calculation of the leverage ratio to be significantly higher than the
amount used in the calculation at December 31, 2008. This is because
the calculation will no longer include the increase in inventory
reserve of $11.5 million recorded in the third quarter of 2008.
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In February 2009, the Company made a second, $7 million, partial debt
repayment and announced a consolidation plan that will create cost
savings and synergies between the operating groups of the Company.
Industry Analysts Recognize Progress
Industry analysts have recognized Orthofix's progress and, as a result,
have questioned Ramius' previously stated intent to sell Blackstone.
"Orthofix is in a position where it must execute its current strategy
through 2009 to achieve its guidance. Ramius, an investment management
firm with a stake in OFIX, has made an aggressive push to hold a special
shareholders meeting to call into questions the suitability of the
Blackstone acquisition, and is attempting to appoint four new
individuals to the Orthofix board of directors. We believe any attempt
to divest the Blackstone business in a fire sale would disrupt
Orthofix's current strategies and limit the company's near-term and
long-term potential."
Canaccord Adams, February 18, 2009
"In our opinion, OFIX's decision to judiciously employ improving cash
flows to pay down debt is sound. OFIX has steadily made prepayments to
reduce the principle amount owed and the strategy to further delever as
cash flows improve is crucial to avoid a covenant breach as the leverage
ratio will come down to 3.25x in Q4:09 and 2.85 in Q1:10. OFIX's
projection of an improving EBITDA run rate is consistent with our model,
and we do not expect OFIX to break any covenants."
Jefferies & Company, Inc, February 18, 2009
Orthofix continues to urge its shareholders to vote on the BLUE proxy
card as recommended by the Board of Directors and as also recommended by
PROXY Governance.
About Orthofix
Orthofix International, N.V., a global medical device company, offers a
broad line of minimally invasive surgical, and non-surgical, products
for the spine, orthopedic, and sports medicine market sectors that
address the lifelong bone-and-joint health needs of patients of all
ages-helping them achieve a more active and mobile lifestyle. Orthofix's
products are widely distributed around the world to orthopedic surgeons
and patients via Orthofix's sales representatives and its subsidiaries,
including BREG, Inc. and Blackstone Medical, Inc., and via partnerships
with other leading orthopedic product companies. In addition, Orthofix
is collaborating in R&D partnerships with leading medical institutions
such as the Orthopedic Research and Education Foundation, Rutgers
University, Texas Scottish Rite Hospital for Children and National
Osteoporosis Institute. For more information about Orthofix, please
visit www.orthofix.com.
Forward-Looking Statements
This communication contains certain forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements, which may include, but are not limited to, statements
concerning the projections, financial condition, results of operations
and businesses of Orthofix and its subsidiaries and are based on
management's current expectations and estimates and involve risks and
uncertainties that could cause actual results or outcomes to differ
materially from those contemplated by the forward-looking statements.
Factors that could cause or contribute to such differences may include,
but are not limited to, risks relating to the expected sales of its
products, including recently launched products, unanticipated
expenditures, changing relationships with customers, suppliers and
strategic partners, risks relating to the protection of intellectual
property, changes to the reimbursement policies of third parties,
changes to and interpretation of governmental regulation of medical
devices, the impact of competitive products, changes to the competitive
environment, the acceptance of new products in the market, conditions of
the orthopedic industry and the economy, corporate development and
market development activities, including acquisitions or divestitures,
unexpected costs or operating unit performance related to recent
acquisitions and other factors described in our annual report on Form
10-K and other periodic reports filed by the Company with the Securities
and Exchange Commission.
Important Additional Information
Orthofix International N.V. ("Orthofix") has filed a definitive proxy
statement, dated February 26, 2009, with the SEC in connection with a
special general meeting of shareholders of Orthofix to be held on April
2, 2009 at which Ramius Capital and certain of its affiliates propose to
make changes to the composition of Orthofix's board of directors.
SHAREHOLDERS ARE URGED TO READ ORTHOFIX'S DEFINITIVE PROXY MATERIALS AND
ANY OTHER RELEVANT SOLICITATION MATERIALS FILED BY ORTHOFIX WITH THE SEC
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors and shareholders
may obtain a free copy of the proxy statement and other materials filed
by Orthofix with the SEC at the SEC's website at www.sec.gov,
at Orthofix's website at www.orthofix.com,
or by contacting Georgeson, 199 Water Street, 26th Floor, New York, NY
10038 or by calling (212) 440-9800 (bankers and brokers) or toll-free
(800) 323-4133 (all others).
Orthofix and its directors and certain executive officers are
participants in the solicitation of proxies in connection with the
special general meeting of shareholders. The names of such persons are:
James F. Gero, Peter J. Hewett, Jerry C. Benjamin, Charles W. Federico,
Dr. Guy J. Jordan, Ph.D., Thomas J. Kester, CPA, Alan W. Milinazzo,
Maria Sainz, Dr. Walter P. von Wartburg, Kenneth R. Weisshaar, Robert S.
Vaters, Michael Simpson, Bradley R. Mason, Raymond C. Kolls, J.D., and
Michael M. Finegan. Information regarding such participants, as well as
each such person's respective interests in Orthofix (whether through
ownership of Orthofix securities or otherwise), is set forth in
Orthofix's definitive proxy statement dated February 26, 2009, which may
be obtained free of charge at the SEC's website at www.sec.gov,
Orthofix's website at www.orthofix.com,
or by contacting Georgeson, 199 Water Street, 26th Floor, New York, NY
10038 or by calling (212) 440-9800 (bankers and brokers) or toll-free
(800) 323-4133 (all others).
SOURCE: Orthofix International N.V.
Orthofix International N.V.
Dan Yarbrough, 617-912-2903
Vice President of Investor Relations
[email protected]
Copyright Business Wire 2009