Ramius
Sends Letter to Orthofix Shareholders
Responds
to Orthofix’s Misleading Statements and Latest Attempt to Distract Shareholders
From Their Record of Failure and Massive Destruction of Shareholder
Value
Urges
Shareholders To Elect Four New, Highly-Qualified Directors
NEW
YORK--(BUSINESS WIRE)--RCG Starboard Advisors, LLC, an affiliate of Ramius LLC
(collectively, “Ramius”), today announced that it has sent a letter to the
shareholders of Orthofix International N.V.’s (“Orthofix” or the “Company”)
(Nasdaq: OFIX) urging shareholders to elect four new, highly-qualified director
nominees to the Company’s ten-member Board at a Special General Meeting of
Shareholders on April 2, 2009. Ramius, the beneficial owner of
approximately 5.6% of the Company’s outstanding common shares, is proposing to
elect J. Michael Egan, Peter A. Feld, Steven J. Lee, and Charles T. Orsatti to
replace James F. Gero, Peter J. Hewett, Thomas J. Kester, and Walter P. Von
Wartburg on Orthofix’s Board.
Ramius
Partner Jeffrey C. Smith stated, “Rather than confronting the substantial issues
that face Orthofix today, the current Board has chosen to wage a smear campaign
relying on baseless accusations as a means to distract shareholders from the
massive destruction of shareholder value that has occurred under its
watch. We urge shareholders not to be distracted from the real issues
and to focus on the fact that the Company’s current plan provides little margin
for error and puts shareholders at substantial risk. New independent
directors will be able to look at all of the available alternatives with a fresh
perspective, unbiased by rationalizations of prior mistakes, to be able to
objectively determine how best to maximize value for all
shareholders.”
Added
Smith, “We firmly believe a reconstituted Board is vital to the Company’s future
success. We urge our fellow shareholders to vote FOR Ramius’ nominees
on their GOLD proxy cards today.”
The full
text of the letter follows:
March 9,
2009
Dear
Fellow Orthofix Shareholder:
The
Ramius Group is seeking your support to elect four highly qualified nominees --
J. Michael Egan, Peter A. Feld, Steven J. Lee, and Charles T. Orsatti -- to
replace four of Orthofix’s ten current directors at the Special General Meeting
of Shareholders to be held on April 2, 2009. We believe this action
is necessary and warranted given the massive destruction of shareholder value
this Board has overseen.
In just
the past three years, the current Board has:
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Presided
over the failed acquisition of Blackstone
Medical;
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Approved
taking on a heavy debt load to fund the
acquisition;
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Accepted
ballooning corporate overhead
costs;
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Failed
to hold management accountable for their repeated failures to meet
financial guidance; and
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Oversaw
the loss of approximately $450 million of market value from $686 million
three years ago to the current market value of approximately $238
million.
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Their
actions and inactions have cost shareholders dearly. Shareholders have seen the value of
Orthofix shares drop by approximately 64% since the acquisition of Blackstone on
August 10, 2006. It is time for a change.
We are not seeking control of the
Board or the Company. Rather, we are seeking to elect
directors who will bring much needed accountability to the Board. The
Ramius nominees are committed to working in the best interests of all
shareholders. We urge you to vote for them on the enclosed GOLD proxy
card today.
THE
UNPROFESSIONAL NATURE AND HOSTILE TONE OF ORTHOFIX’S COMMUNICATIONS WITH
SHAREHOLDERS CLEARLY DEMONSTRATES THE NEED FOR SUBSTANTIAL CHANGE ON THE
BOARD
In
response to our thoughtful analysis and proposals regarding both the strategic
direction of Orthofix and the composition of the Board, the Company has chosen
to run a mud slinging campaign focused on baseless accusations regarding our
firm, our nominees, and our intentions for Orthofix. We are not
surprised by these actions given that we recently learned that Orthofix ended a
long-term relationship with a well-regarded financial public relations firm and
decided instead to engage an extremely expensive public affairs firm focused on
running a quasi-political smear campaign to try to discredit Ramius and our
nominees. In its communications with shareholders, Orthofix is
attempting to distract shareholders from the real and critical issues facing the
Company by offering up unprofessional, personal attacks. These
attacks only serve to further damage the Company’s standing in the financial
community and provide no benefit to shareholders. We believe these actions clearly
demonstrate that the current Board is deeply entrenched and unable or unwilling
to confront its failures and govern the company in the best interests of
shareholders.
DO
NOT BE DISTRACTED BY ORTHOFIX’S LATEST DESPERATE ATTEMPT TO DIVERT ATTENTION
FROM THEIR RECORD OF FAILURE
They claim that we are “an
opportunistic, activist hedge fund that has engaged in numerous proxy contests
over the past several years...”and that “It is difficult for your Board to take
instruction from a hedge fund that appears to be unable to manage its own
affairs. For example, according to published reports, in the last
year Ramius was forced to close four of its funds.”
The Facts: Ramius is a well
regarded investment firm with over $7.5 billion of assets under
management. We have been in business since 1994 and, through the
Ramius Value and Opportunity Master Fund, have a long and successful track
record of creating value for shareholders of underperforming public companies
through shareholder action. Our core competency is working with
public companies to develop and execute value enhancing plans.
Ramius
was not “forced to close four of its funds”. In reality, the senior
management of Ramius took it upon themselves to apply prudent business judgment
and make adjustments to the cost structure of our firm in light of weakening
economic conditions and the realities of the current environment. As
such, we voluntarily merged these strategies into our multi-strategy fund, where
the overwhelming majority of investors chose to remain invested with
Ramius. In doing so, we have positioned Ramius to take advantage of
significant opportunities going forward and have enhanced the profitability of
the firm. If only Orthofix had been governed with similar discipline,
shareholders might have been spared the massive losses of value experienced in
the last several years. This contest is not about
Ramius. This contest
is about the failures of the current Board and the need for responsible
oversight at Orthofix.
They claim we have “no
plan”.
The Facts: As we have outlined
in detail in previous communications with shareholders, we have done extensive
due diligence on Orthofix, its competitors, and the industries in which it
operates. Based on this research, we outlined a preliminary plan in
our letter to shareholders on December 3, 2008 that, we believe, would
dramatically improve cash flow and earnings, stabilize the capital structure,
and position Orthofix for success. This plan includes evaluating a
potential sale of Blackstone, using the proceeds to repay a portion of the
outstanding debt, and significantly reducing the corporate overhead that has
ballooned since the acquisition of Blackstone. These actions, in our
opinion, would lead to a significant improvement in shareholder value and
protect shareholders from further costly amendments to the terms of the
Company’s debt financing. We believe a sound strategy based
upon rigorous analysis deserves serious consideration, not a quick
dismissal.
In our
subsequent communications with shareholders, we have expressed the view that our
nominees approach the Orthofix situation with an open mind and will, if elected,
evaluate the above alternatives as well as any other alternatives available to
Orthofix. Our goal is simple. We want to work with the
Board of Orthofix to protect and grow the value of the Company for all
shareholders.
Do
not be misled by Orthofix’s attempt to distract shareholders from the key issues
facing the Company. We have gone to great lengths to propose options
that we believe are in the best interest of all shareholders. Our
highly qualified nominees will start with these options as a basis for
evaluating all available avenues to maximize the value of Orthofix for all
shareholders.
They claim our nominees are
unqualified and will disrupt “progress” at Orthofix:
The Facts: The continued
personal attacks against two of our nominees are baseless in fact and
unprofessional in nature. The Company has chosen to run a smear
campaign against these nominees merely to distract shareholders from the
terrible performance of Orthofix and the complete and utter failure of the
current Board to effectively govern and oversee Orthofix. Nothing
speaks louder than the massive destruction of shareholder value under the
control of this Board. As you can see from the table below,
Orthofix’s stock price has significantly underperformed both the direct peer
group and the broader market indices over the past one, three, and five year
periods.
1,
3, and 5-Year Stock Price Performance Through March 6, 2009
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Peer
Group
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(39.6%)
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(36.3%)
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(25.9%)
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NASDAQ
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(40.4%)
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(42.5%)
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(35.2%)
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S&P
500
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Orthofix
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(63.9%)
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(65.9%)
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(69.3%)
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** Peer
Group per Orthofix 10-K includes: Smith & Nephew, Medtronic, Johnson &
Johnson, Synthes, Stryker,
Zimmer,
Kinetic Concepts, Ossur, and I-Flow. Peer Group index is
equal-weighted.
In
regards to our nominee Steven Lee, during his tenure as a Founder and the CEO of
PolyMedica Corporation, PolyMedica set the standards for its industry in almost
every area. Indeed, the sale of the company to Medco Health in 2007,
for $1.5 billion, attests to the quality of the company and its
founders. Contrary to Orthofix’s attempt to smear his record, he has
never been accused of any wrongdoing or of any ethical lapse by the Federal
government or any other regulatory authority. Furthermore, PolyMedica
never admitted to any wrongdoing as part of its settlement with the Federal
government. It is fairly commonplace for companies who rely on
government reimbursement to be investigated from time to time. Due to
the high legal costs to defend these investigations, many of them settle for
cash payments without prejudice. This was most certainly the case
with PolyMedica.
We find
it interesting that Orthofix would use this diversion to try to discredit Mr.
Lee, when Orthofix itself is currently the target of an investigation by the
Department of Health and Human Services, Office of the Inspector General, under
the authority of the federal healthcare anti-kickback and false claims
statute.
In
addition, contrary to the Company’s baseless assertions, our nominee Peter Feld
is highly qualified to serve on the Board of Orthofix. While not
“publicized” on the Ramius website, which Orthofix deems to be the necessary
measure of qualification, Mr. Feld is a senior member of the investment staff
and has been instrumental in the success of the Ramius Value and Opportunity
Master Fund as well as other Ramius investment products. Through
experience, hard work and dedication, Mr. Feld has a distinguished track-record
of identifying undervalued companies and successfully working with the Ramius
investment team to construct alternatives to enhance shareholder
value.
They claim that Ramius has
shown no interest in avoiding a proxy contest:
The Facts: We have tried on
several occasions to have a constructive dialogue with Orthofix in the hopes of
avoiding this contest. However, we have made it abundantly clear that
any settlement would require direct shareholder representation on the
Board. We believe this is a prudent and reasonable request given the
massive destruction of shareholder value under the current Board’s
“leadership”. We firmly believe that having direct shareholder
representation will bring a much needed sense of accountability to the Board
room. Frankly, we
fail to understand why the Company is so adamantly opposed to having a
representative of shareholders on the Board, a policy which is generally
considered good corporate governance.
Our sole
interest in this campaign is to compose the best possible Board to represent the
interests of all Orthofix shareholders.
It is
important for shareholders to know that our meetings to date with two current
members of the Board, Alan Milinazzo and James Gero have been
unproductive. We
are, however, prepared to meet as soon as possible with the independent members
of the current Board who are not up for election at the upcoming special
meeting. We believe a dialogue with these individuals could prove to
be significantly more productive as they are less conflicted since they are not
up for election. We stand ready and willing to meet, and, as
always, will consider any and all options or alternatives that we believe to be
in the best interest of all Orthofix shareholders.
They complain that this
Special Meeting will occur two months before Orthofix’s regularly-scheduled
Annual Meeting.
The Facts: The current Board
scheduled the Special Meeting on a date that is as far out as possible under
Netherlands Antilles law after receiving written demands for such a meeting from
holders of 55% of the outstanding shares of the Company. It is beyond
disingenuous for the Company to accuse Ramius of wasting shareholder resources
when the scheduling they complain about is of their own design. As
stated above, we are ready, willing, and able to meet with the independent
members of the Board not standing for election at the Special
Meeting. We firmly believe a meeting with these individuals would
present the best chance for reaching a mutually agreeable settlement to avoid
the necessity of the Special Meeting.
THE
RAMIUS NOMINEES ARE COMMITTED TO ACTING IN YOUR BEST INTERESTS
CAST
YOUR VOTE FOR CHANGE AT ORTHOFIX – PLEASE SIGN, DATE AND MAIL THE ENCLOSED GOLD
PROXY CARD TODAY
Please
visit www.ShareholdersForOrthofix.com
for more information on the upcoming special meeting and to view Ramius’
solicitation materials in connection with the meeting. A copy of all
proxy materials and shareholder communications are available on the
website.
We thank
you for your consideration and support.
Best
Regards,
/s/
Jeffrey C. Smith
Partner
Ramius
LLC
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.
Contacts
Media
& Shareholders:
Sard
Verbinnen & Co
Dan
Gagnier/ Renée Soto/Jonathan Doorley
212-687-8080