UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
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Soliciting Material
Pursuant to §240.14a-12
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ORTHOFIX
INTERNATIONAL N.V.
(Name of
Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Dan
Yarbrough, Vice President of Investor
Relations
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danyarbrough@orthofix.com
(617)
912-2903
Orthofix
International Sends Letter to Shareholders
Opposing
Ramius Board Nominee
BOSTON,
March 9, 2009 – Orthofix International N.V. (NASDAQ: OFIX) (the Company)
announced today it sent a letter to its shareholders, which is included below,
opposing the proposal being made by Ramius LLC to nominate Peter Feld to the
Company’s Board of Directors at a Special Meeting of Shareholders scheduled for
April 2, 2009.
Dear
Fellow Orthofix Shareholder:
As you
know, Orthofix will hold a Special Meeting of Shareholders on April 2, 2009. The
purpose of this meeting is to consider a number of proposals put forward by
Ramius, an activist hedge fund. One of Ramius’ proposals involves
their nomination of Peter Feld to replace a current member of Orthofix’s Board
of Directors. In our previous communications we have expressed
legitimate concerns about Ramius’ nomination of Feld, yet they continue to
promote him as a candidate while ignoring our repeated offers to interview two
of their other nominees, Charles Orsatti and J. Michael Egan. Instead
of addressing our concerns about Feld’s lack of qualifications and experience,
which are based on publicly available facts, Ramius characterizes them as
“baseless accusations.” We want you to have the facts about Feld and
Ramius itself. We continue to
urge you to reject the Ramius solicitation and instead vote Orthofix’s BLUE
proxy card.
Who
is Peter Feld and why does Ramius believe their 29-year-old employee with no
operating or healthcare experience can add value to the Orthofix
Board?
Based on
his own biography in Ramius’ proxy materials, Peter Feld has no operating or
healthcare experience. In fact, other than a short tenure with Ramius and
previous experience as an investment banking analyst with Bank of America, it is
unclear what value this 29-year-old individual could bring to the Orthofix
Board. Feld serves on the Board of CPI Corp., a portrait studio company whose
stock price has dropped more than 50% over the last seven months and is currently in danger of being
delisted by the New York Stock Exchange (NYSE). Feld also had
a five-month stint as a member of the Board of Sharper Image prior to the company filing for
bankruptcy. He ascended to the Sharper Image Board as the result of a
previous Ramius activist campaign, as described below, and this track record
should cause Orthofix shareholders to question Ramius’ judgment as well as their
commitment to the companies in which they take activist positions.
When Feld
resigned from the
Board of Sharper Image after a mere five months of service, he wrote to
the other Board members with the following resignation letter:
“As you
know, I have been considering for some time whether to resign from the Board of
Sharper Image. I have tremendous respect for the progress you and the team have
made in turning around the company. Given the size of Ramius’ portfolio and the
other investments I am involved in, continuing as an active member of the Board
of Directors of Sharper Image is no longer the best use of my
time and resources. As a result, I am resigning from the Board of
Directors of Sharper Image, effective the close of business on Friday, January
25, 2008.”
Emphasis added; Source: Sharper
Image 8-K, January 29, 2008, exhibit 9.01, available at: http://www.sec.gov/Archives/edgar/data/811696/000118143108005844/0001181431-08-005844-index.idea.htm
This
letter has caused great concern among our Board members for a number of reasons.
First, Feld writes of “considering for some time whether to resign,” despite the
fact that his
entire tenure on the Board was
only five months long. Second, he cites his other investments
and obligations as a reason for resigning. Orthofix shareholders
should be concerned about this level of “commitment” being proposed for our
Board. Third, Feld congratulates the Board for progress “in turning around
the company,” a sentiment that he expressed the month before Sharper
Image filed for bankruptcy protection. This hardly appears to demonstrate
either good business judgment or an understanding of best practices in corporate
governance matters.
In
contrast, the current Orthofix Board is comprised of highly qualified
individuals specifically chosen for their business and healthcare expertise.
This Board has also implemented best-in-class corporate governance practices to
guide Orthofix, including:
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No
staggered or classified Board of Directors; all directors stand for
election annually,
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The
roles of Chairman and CEO are held by separate
individuals,
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The
Audit, Compensation, and Nominating & Governance Committees are
comprised of independent directors,
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The
Board regularly meets without the CEO at least two times per
quarter,
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The
company uses outside advisers as
necessary,
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The
Board conducts regular CEO performance
reviews,
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A
Board education program is in
place,
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A
Board self-assessment is conducted once per
year,
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Shareholder
rights are promoted by the company’s articles of association,
including
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No
anti-takeover defenses,
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No
supermajority voting requirements,
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Shareholders
can call a special meeting,
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Shareholder
vote required to change articles of
association.
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We
do not believe that Feld’s experience will bring value to Orthofix
shareholders
Significant
recent indications of progress and improved performance at Blackstone validate
our strategy. On February 12, the Company released its fourth quarter 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 as
compared with the third quarter of 2008. 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®
Evolution™, 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™ pedicle
screw system and the PILLAR™ 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.
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Further,
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 question 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
“On one
hand, we agree that the Ramius proposal to sell the Blackstone unit would likely
result in an immediate increase in shareholder value, but this may not
necessarily be the best long-term strategic move for the company. We
believe management is taking appropriate steps to successfully turn around its
spine business.”
Susquehanna
International Group, February 24, 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
Reject
the Ramius solicitation and vote the Company’s BLUE proxy card.
Orthofix
is on the right track today and we believe Ramius lacks strategic focus and
business discipline. We strongly recommend that you reject Ramius’
attempts to derail this progress through the nomination of highly problematic
director candidates, and lack of strategic focus and business discipline. Vote
the Company’s BLUE proxy card.
Sincerely,
Orthofix
Board of Directors
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For
assistance in voting your shares, please call
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