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Shareholder advisory firm backs rejecting Exfo privatization offer

QUEBEC — Proxy advisory firm Glass Lewis has differed from Institutional Shareholder Services Inc. in recommending that minority shareholders of Exfo Inc. vote against the founder's proposal to take the company private.

A special meeting will be held Aug. 13 to vote on the June 7 proposal from majority shareholder Germain Lamonde to pay US$6 per subordinate voting share, representing a 62 per cent premium from where the shares were in the previous trading day.

Glass Lewis was critical of Lamonde for his "obdurate" rejection of the proposal from competitor Viavi Solutions Inc. to pay US$8 per share and the snubbing by the Exfo special committee of Viavi's repeated approaches.

The advisory firm says it was "fundamentally problematic" that the special committee that is charged with ensuring the interests of minority shareholders are accounted for would rely on the position of Exfo's controlling shareholder to advance a substantially inferior proposal.

The opinion differs from ISS which Exfo announced on Tuesday supports Lamonde's offer. 

Lamonde controls 61.46 per cent of Exfo outstanding shares and 93.53 per cent of voting rights.

"[W]e see no reason for minority investors to functionally reward Mr. Lamonde's seemingly indifferent approach to privatization," Glass Lewis said.

"Exfo shareholders should ask themselves if Mr. Lamonde isn't a seller of shares at $8, why should they approve his buying of shares at $6."

Exfo's board, helped by legal advisers and following the unanimous recommendation of independent members, said it will not pursue the Viavi proposal because the "unambiguous statements" from Lamonde mean it can't be completed and is there not a "superior proposal" under terms of the existing proposal.

Viavi submitted a bid of US$4.75 per share in cash last November, which was increased to US$5.25 last May and subsequently increased to US$8.

Founded in 1985, Exfo makes test, monitoring and analytics equipment for the communications industry.

This report by The Canadian Press was first published Aug. 6, 2021.

Companies in this story: (TSX:EXF)

The Canadian Press