Microsemi Corporation Announces Proposal to Acquire Zarlink Semiconductor, Inc. for CAD $3.35 in Cash, Updates Guidance

Price represents 40% all-cash premium to Zarlink shareholders
Combination would extend Microsemi’s reach into communications and medical markets
Improves competitive position for Zarlink and its products
Immediately accretive to Microsemi’s non-GAAP earnings before synergies
Microsemi is committed to completing compelling transaction for shareholders of both companies
Microsemi updates guidance
Conference call to be held at 8:30 a.m. EDT July 20, 2011

The proposed transaction has a total equity value of USD $548.7 million based on a fully diluted share count and represents a 40 percent premium to Zarlink’s share price as of July 19, 2011, and a 43 percent premium to Zarlink’s trailing 30 day average share price. The CAD $3.35 proposal exceeds every Zarlink closing share price over the last five years. Microsemi’s proposal recognizes the recent efforts of Zarlink and its employees to stabilize its business, and provides the opportunity for Zarlink to benefit from Microsemi’s management expertise, technology leadership, and sales platform.

Microsemi today has sent a letter to Zarlink’s board of directors outlining its proposal (full text of letter is below). This proposal follows several earlier attempts by Microsemi to engage in private discussions with Zarlink, including two written proposals to Zarlink’s board of directors. Both proposals, including the most recent one made on June 17, 2011 proposing an all-cash purchase price per share in a negotiated transaction of between CAD $3.25 and $3.55, were rejected by Zarlink without discussion.

“We remain interested in engaging with Zarlink’s board to complete a transaction that delivers value to shareholders,” said James J. Peterson, Microsemi president and chief executive officer. “We are committed to building and strengthening its business, and believe our proposal provides a superior outcome for Zarlink’s shareholders, employees, customers, and the local economy.”

The acquisition is expected to be immediately accretive to Microsemi’s earnings per share even before the realization of any synergies. Morgan Stanley Senior Funding, Inc. and Microsemi have executed a financing commitment letter to ensure that the required funds are available to finance the acquisition on an all-cash basis, and Microsemi has retained Stifel Nicolaus Weisel and Morgan Stanley & Co. LLC as its financial advisors.

Headquartered in Ottawa, Canada, Zarlink designs mixed-signal semiconductor products for a range of communications and medical applications. Zarlink offers more than 900 active products, and ships approximately 100 million ICs per year to over 400 customers.

“We believe this proposed acquisition provides considerable growth opportunities, and greatly benefits the shareholders of both companies,” added Peterson. “Zarlink’s shareholders will receive a substantial premium, in cash, and without execution or macroeconomic risk, while Microsemi’s shareholders will benefit from the integration of this highly accretive opportunity.”

Microsemi has also provided updated guidance for the June quarter. Net sales are expected to be at the high end of Microsemi’s revenue guidance. Microsemi will report its results on July 28.