![]() Proposed Acquisition of Zarlink Semiconductor July 20, 2011 Exhibit 99.2 |
![]() 2 Power Matters Disclaimer © 2011 Microsemi Corporation Cautionary Statement Regarding Forward-Looking Statements Microsemi and the Microsemi logo are registered trademarks or service marks of Microsemi Corporation and/or its affiliates. Third-party trademarks and service marks mentioned herein are the property of their respective owners. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Any statements set forth in this news release that are not entirely historical and factual in nature, including without limitation statements related to Microsemi's revenue and earnings guidance and the potential benefits of the acquisition of Zarlink including its immediately accretive impact on earnings and its effect on Microsemi’s growth potential are forward-looking statements. These forward-looking statements are based on our current expectations and are inherently subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. The potential risks and uncertainties include, but are not limited to, such factors as the risk that Microsemi will not be able to complete the acquisition without the cooperation of Zarlink's board and management team; the risk that even if the parties work cooperatively on an acquisition, they will not be able to successfully negotiate and enter into a definitive acquisition agreement or, if such an agreement is entered into, the parties will be unable to comply with or satisfy the closing conditions contained therein; the risk that Zarlink’s business and technology will not be successfully integrated with Microsemi's business, including product mix and acceptance, achievement of gross margins and operational and other cost synergies; negative or worsening worldwide economic conditions or market instability; downturns in the highly cyclical semiconductor industry; intense competition in the semiconductor industry and resultant downward price pressure; inability to develop new technologies and products to satisfy changes in customer demand or the development by the company's competitors of products that decrease the demand for Microsemi's products; unfavorable conditions in end markets; inability of Microsemi's compound semiconductor products to compete successfully with silicon-based products; production delays related to new compound semiconductors; variability of the company's manufacturing yields; the concentration of the factories that service the semiconductor industry; delays in beginning production, implementing production techniques, resolving problems associated with technical equipment malfunctions, or issues related to government or customer qualification of facilities; potential effects of system outages; inability by Microsemi to fulfill customer demand and resulting loss of customers; variations in customer order preferences; difficulties foreseeing future demand; rises in inventory levels and inventory obsolescence; potential non-realization of expected orders or non-realization of backlog; failure to make sales indicated by the company's book-to-bill ratio; Microsemi's reliance on government contracts for a portion of its sales; risks related to the company's international operations and sales, including political instability and currency fluctuations; increases in the costs of credit and the availability of credit or additional capital only under more restrictive conditions or not at all; unanticipated changes in Microsemi's tax provisions or exposure to additional income tax liabilities; changes in generally accepted accounting principles; principal, liquidity and counterparty risks related to Microsemi's holdings in securities; environmental or other regulatory matters or litigation, or any matters involving contingent liabilities or other claims; the uncertainty of litigation, the costs and expenses of litigation, the potential material adverse effect litigation could have on Microsemi's business and results of operations if an adverse determination in litigation is made, and the time and attention required of management to attend to litigation; difficulties in determining the scope of, and procuring and maintaining, adequate insurance coverage; difficulties and costs of protecting patents and other proprietary rights; the hiring and retention of qualified personnel in a competitive labor market; acquiring, managing and integrating new operations, businesses or assets, and the associated diversion of management attention; uncertainty as to the future profitability of acquired businesses, and delays in the realization of, or the failure to realize, any accretion from acquisition transactions; any circumstances that adversely impact the end markets of acquired businesses; and difficulties in closing or disposing of operations or assets or transferring work from one plant to another . In addition to these factors and any other factors mentioned elsewhere in this news release, the reader |
![]() 3 Power Matters Disclaimer © 2011 Microsemi Corporation should refer as well to the factors, uncertainties or risks identified in the company's most recent Form 10-K and all subsequent Form 10-Q reports filed by Microsemi with the SEC. Additional risk factors may be identified from time to time in Microsemi's future filings. The forward-looking statements included in this release speak only as of the date hereof, and Microsemi does not undertake any obligation to update these forward-looking statements to reflect subsequent events or circumstances. Guidance is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of certain items that have been excluded from the forward-looking non-GAAP measures, and a reconciliation to the comparable GAAP guidance has not been provided because certain factors that are materially significant to Microsemi’s ability to estimate the excluded items are not accessible or estimable on a forward-looking basis. ADDITIONAL INFORMATION Neither this communication nor the any of the statements incorporated by reference in this communication constitutes an offer to buy or solicitation of an offer to sell any securities. No take-over bid or tender offer for the shares of Zarlink has commenced at this time. In connection with the proposed transaction Microsemi may file take-over bid or tender offer documents with the applicable Canadian securities authorities and the U.S. Securities and Exchange Commission (“SEC”). Any definitive take-over bid or tender offer documents will be made available to shareholders of Zarlink. INVESTORS AND SECURITY HOLDERS OF ZARLINK ARE URGED TO READ THESE AND OTHER DOCUMENTS FILED WITH THE APPLICABLE CANADIAN AUTHORITIES AND THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents filed by Microsemi with the applicable Canadian securities authorities through the website maintained by the Canadian Securities Administrators at http://www.sedar.com and with the SEC through the web site maintained by the SEC at http://www.sec.gov. |
![]() 4 Power Matters Presentation Outline Proposal To Acquire Zarlink Microsemi Overview Strategic Rationale Transaction Rationale Conclusions and Next Steps © 2011 Microsemi Corporation |
![]() Proposal to Acquire Zarlink |
![]() 6 Power Matters Provision Microsemi's Proposal to Acquire Zarlink All-cash CAD $3.35 per share offer for all of Zarlink 40% premium to Zarlink’s closing price on July 19, 2011 59% premium to Zarlink’s 52-week average closing price 18% premium to Zarlink’s 5-year high closing price At least $0.20 accretive to non-GAAP EPS in first year Immediately accretive Microsemi has studied all regulatory approvals and is confident no substantial hurdles exist © 2011 Microsemi Corporation Executed a financing commitment letter with Morgan Stanley Senior Funding, Inc. Microsemi is committed to maintaining its current credit rating Consideration Premium Accretion Financing Regulatory Approval |
![]() Microsemi Overview |
![]() 8 Power Matters About Microsemi Focused on providing solutions where Power Matters, security is non-negotiable, and reliability is vital – Defense & Security – Aerospace – Enterprise & Communications – Industrial & Alternative Energy Industry's most extensive technology portfolio for targeted markets – High-performance, high-reliability analog devices – Mixed-signal and RF integrated circuits – Customizable System on Chip solutions (Analog + FPGA + uController) – Complete subsystems © 2011 Microsemi Corporation About Microsemi |
![]() 9 Power Matters Communications Lighting and Display Storage and Networking Homeland Security Enterprise Security Military and Defense Commercial Avionics Satellite Alternative Energy Medical Industrial Control SEMI Cap Equipment Markets, Customers, and Applications Industrial & Alternative Energy Defense & Security Aerospace Enterprise & Communications Note: LTM as of 4/3/11 and only includes approximately five months of Actel revenue. © 2011 Microsemi Corporation |
![]() 10 Power Matters 2011 2006 2001 Small Signal Transistors Medium Signal Transistors Inverters LDOs 2001 SAM: $500M 2006 SAM: $850M GaAs Diodes RF Power Amplifiers Power Switching Small Signal Transistors 2011 SAM: $4.1B Anti-Tamper Board Level Systems DC/DC – ICs – Converters – Subsystems FPGAs/SoCs GaAs Diodes LED Backlighting RadHard – MOSFETS – Hybrids – Transistors Power over Ethernet WLAN Power Amplifiers A Model of Managed Growth Consistently Driving SAM Expansion Zarlink conservatively adds approximately $1B to Microsemi’s current $4.1B SAM © 2011 Microsemi Corporation |
![]() 11 Power Matters $370 $679 FY2006 LTM FY2011: FY2010: FY2009: FY2008: FY2007: FY2006: Proven History of Growth (Defense Systems Business) © 2011 Microsemi Corporation Note: LTM as of 4/3/11 and only includes approximately five months of Actel revenue. Fiscal years ending on or about September 30. Microsemi Revenue ($ in millions) (Power Products Business) Model for growth driven by 2/3 organic expansion and 1/3 strategic acquisitions |
![]() Strategic Rationale |
![]() 13 Power Matters Provision Overview of Zarlink Semiconductor Fabless mixed-signal semiconductor company Communications & medical markets focus - Ultra low-power wireless - Network timing - Line Circuits - VoIP Portfolio of more than 900 products More than 400 customers Headquartered in Ottawa, Ontario with significant presence in Austin, Texas 519 employees as of March 25, 2011 Financial highlights (FY ended 3/25/11): – Revenue: $230.2 million – Gross Margin: 51.7% – EBITDA: $39.7 million – Operating Margin: 15.7% (non-GAAP, excludes one- time items) FY2011 Revenue Breakdown © 2011 Microsemi Corporation Asia Pacific 63% Europe 20% United States 16% Other 1% Communication Products 79% Medical Products 12% Custom and Other 9% Source: Zarlink 20-F filed on 6/6/2011. |
![]() 14 Power Matters Provision Solidifies Medical Products Leadership © 2011 Microsemi Corporation Implantable Technology Ultra low Power Wireless MRI Power Switching High power RF Defibrillator Pacemaker Portable Patient Monitoring Processing: Sense and Control Power Management Processing: Sense and Control Power Management Oncology-Radiation Treatment Power Delivery, Management |
![]() 15 Power Matters Building a Leadership Communications Strategy Power Conversion Power Delivery VoIP, FTTx, DSL Network Timing & Synchronization Voice Processing Wireless WAN / LAN RF Front End Sense and Control Power Management Customizable System on Chip (cSoC) Power over Ethernet (PoE) © 2011 Microsemi Corporation |
![]() 16 Power Matters Strengthening Communications Penetration DSL FTTx Hybrid Cable FTTx PoE Power Management WAN / LAN Subscriber Line Circuits MSAN Deployment High Quality VoIP © 2011 Microsemi Corporation |
![]() 17 Power Matters Broad Customer Relationships © 2011 Microsemi Corporation Source: Company filings and press releases. |
![]() Transaction Rationale |
![]() 19 Power Matters Background of Discussions Microsemi expresses interest in exploring a strategic transaction with Zarlink to former CEO Kirk Mandy January – April 2011 May 2011 June 2011 Microsemi expresses continued interest in a strategic transaction to Zarlink’s Chairman, Adam Chowaniec Microsemi submits indication of interest to acquire Zarlink for CAD $3.00 per share Gary Tanner succeeds Kirk Mandy as CEO Zarlink’s Board of Directors unanimously rejects proposal and request for an in-person meeting Microsemi submits revised indication to acquire Zarlink for CAD $3.25 to $3.55 per share (with further diligence required for high end of range) Zarlink’s Board of Directors unanimously rejects revised proposal and request for an in-person meeting © 2011 Microsemi Corporation |
![]() 20 Power Matters Provision Strong Strategic Rationale Strengthens Position in High-Value, High Barrier-to- Entry Markets Expand Mixed-Signal Product Portfolio and Design Capabilities Drive Revenue Growth Building on Existing Product Strategies and Overlapping Customers Financially Attractive Fortify leading medical position - ultra low-power radio Continue to build strong position in communications Enter large, growing timing market Bolster existing portfolio with complementary medical wireless and communications product families Establish engineering talent centers in new geographic locations Communications products building on Microsemi’s PoE, cSoC and RF offerings in enterprise & comms Strong cross-selling potential in existing customer base Increased content per application Adds meaningful scale with similar financial profile Opportunity to unlock operational benefits and synergies Immediately accretive to EPS, before synergies © 2011 Microsemi Corporation |
![]() 21 Power Matters Provision Diversified, Balanced Market Exposure © 2011 Microsemi Corporation Revenue $679.1 million Revenue $230.2 million Revenue $909.3 million Source: SEC Filings. Note: LTM revenue figures ending Q1 of CY2011. Defense & Security 38% Aerospace 23% Enterprise & Communications 20% Industrial & Alternative Energy 19% Communications 79% Medical & Other 21% Enterprise & Communications 34% Defense & Security 29% Industrial & Alternative Energy 20% Aerospace 17% |
![]() 22 Power Matters $3,010 $2,634 $2,412 $1,492 $1,123 $909 $832 $679 $638 $486 $475 $305 $298 $213 $151 $134 $83 Significant Revenue Scale ($ in millions) © 2011 Microsemi Corporation Top Third of Industry Peers Source: SEC Filings. Note: LTM revenue figures ending Q1 of CY2011. |
![]() 23 Power Matters Financial Overview Last Twelve Months Long-Term Model Microsemi Zarlink Pro Forma (2) Revenue $679.1 $230.2 $909.3 Gross Margin 52.4% 51.7% 52.2% 60% EBITDA (1) $184.2 $39.7 $223.9 Operating Margin (1) 23.3% 15.7% 21.4% 30% ($ in millions) Large revenue base with almost $1 billion in LTM revenue Strong combined gross and operating margins Significant cash flow generation Note: LTM ending Q1 of CY2011. (1) Non-GAAP figures exclude stock-based compensation, amortization of acquired intangibles, restructuring charges and other one-time items. (2) Combined financials assume no synergies. © 2011 Microsemi Corporation Source: SEC Filings |
![]() 24 Power Matters Provision Committed Acquisition Financing © 2011 Microsemi Corporation ($ in millions) Note: EBITDA calculated by annualizing the latest fiscal quarter for Microsemi and Zarlink. (1) Non-GAAP figures exclude stock-based compensation, amortization of acquired intangibles, restructuring charges and other one-time items. Debt Most Recent Quarter Annualized EBITDA (1) Debt / Annualized EBITDA (1) Microsemi (4/3/11) $375.0 $244.4 1.5x Additional Debt 425.0 Zarlink (3/25/11) 31.1 Pro Forma Microsemi $800.0 $275.5 2.9x Source: 8-K filed on 4/28/11 and two most recent 10-Qs for Microsemi; 6-K filed on 5/25/11 for Zarlink. |
![]() 25 Power Matters All Cash Premium Proposal vs. Status Quo Microsemi’s Proposal All-cash substantial premium Larger platform and sales organization strengthens position in competitive landscape Continued investment in the business and employees Zarlink Standalone Significant execution risk Limited liquidity for shareholders Unproven management Microsemi’s proposal offers superior value to Zarlink’s shareholders © 2011 Microsemi Corporation |
![]() 26 Power Matters Zarlink's Weak Historical Stock Price Performance Last 5 Years Indexed Source: FactSet. © 2011 Microsemi Corporation 0% 20% 40% 60% 80% 100% 120% 140% 160% Zarlink S&P/TSX NASDAQ SOX |
![]() 27 Power Matters Zarlink Standalone Risk Mitigated as Part of Microsemi Improve competitive position vis-à-vis large incumbents Improve supplier relationships and support Leverage rich mixed-signal technology portfolio Global sales / operations infrastructure Eliminate customer / product concentration Broaden end-market exposure Benefit from additional growth vectors © 2011 Microsemi Corporation Scale Resources Diversity |
![]() 28 Power Matters Zarlink's Mixed Results © 2011 Microsemi Corporation Source: SEC filings and Zarlink press releases. FY11A Historical Growth Revenues FY09/FY10 FY10/FY11 FQ3/FQ4 Observations Communications $180.5 1% 28% (4%) Line circuits/timing growing Telecom network products declining Medical $28.6 (14%) (5%) 10% Medical telemetry growing Audiologic medical products declining Custom $21.1 12% (36%) (23%) Further R&D abandoned Managing last time buys Total $230.2 0% 13% (4%) June quarter guidance flat Q/Q |
![]() 29 Power Matters Compelling Offer for Zarlink Shareholders © 2011 Microsemi Corporation Source: Company filings, First Call Consensus and selected Wall Street research. Based on stock prices as of 7/19/11. (1) LTM ending Q1 of CY2011; enterprise value calculated using fully diluted shares outstanding. (2) Reflects median statistics. Comp Group Includes: AMCC, EXAR, TSX:GND, IDTI, MSPD, PMCS, SMTC, SLAB, SUPX and VTSS. (3) Assumes CAD 1.000 = $1.053. (4) Non-GAAP figures exclude stock based compensation, amortization of purchased intangibles, restructuring charges and other one-time items. (5) Based on First Call Consensus estimates and SEC filings. (6) Source: Capital IQ. Includes public Canadian M&A transactions with cash considerations only, between $400mm and $2bn, and from 1/1/2006 to 7/19/2011. 9.4x 7.2x 11.2x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x Comp Group Zarlink (Current) Zarlink (Offer) 1.5x 1.2x 1.9x 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x Comp Group Zarlink (Current) Zarlink (Offer) 31% 40% 0% 10% 20% 30% 40% 50% Avg. Premium Offer Premium Enterprise Value / LTM Revenue (1) Enterprise Value / LTM EBITDA (1)(4) Canadian Premiums Paid Last 5 Years (6) (2) (3) (3) (2) (3) (3) Projected Revenue Growth CY10 – CY11E (5) 4% 1% 0% 1% 2% 3% 4% 5% Comp Group Zarlink (2) |
![]() Conclusions and Next Steps |
![]() 31 Power Matters Conclusions and Next Steps © 2011 Microsemi Corporation Microsemi wishes to proceed on a friendly basis We have a great respect for what Zarlink has accomplished since 2008, and we believe the execution risk of an uncertain plan and other risks are mitigated as part of Microsemi CAD $3.35 is a compelling valuation and an attractive liquidity option for Zarlink shareholders Zarlink’s shareholder meeting is July 27th – we hope shareholders make their feelings known We are prepared to go directly to shareholders if Zarlink’s board refuses to act in its shareholders’ interest Microsemi has strong momentum in its own business We will update you on our July 28th earnings call |