Certicom Board Recommends Shareholders Reject Significantly Undervalued Hostile Bid from RIM
MISSISSAUGA, ON - Certicom Corp. ("Certicom" or "the Company") announced December 22, 2008 that its Board of Directors is advising its shareholders to reject the hostile offer of $1.50 per share from a wholly-owned subsidiary of Research in Motion Limited ("RIM"). After a thorough review involving both the Special Committee of independent directors and its financial and legal advisors, the Board found the RIM bid to be significantly undervalued, opportunistic and not in the best interests of Certicom shareholders.
The Board's recommendation to shareholders not to tender to the RIM bid, and its reasons for the recommendation, are included in a Directors' Circular being sent to shareholders today. A copy of the Directors' Circular is available on the Company's website at www.certicom.com and on SEDAR at www.sedar.com.
Among other things, the Board found that, at $1.50 per share, the RIM offer does not provide fair value for Certicom's cash on hand and the significant potential tax assets that could be available to a taxable Canadian corporation - such as RIM. Further, RIM's hostile bid undervalues both Certicom's valuable and unique industry-leading data encryption technology and the recent progress the Company has made in implementing its strategic plan.
The Circular also notes that the Board is continuing to conduct a value maximization process that is designed to facilitate the proposal of superior alternatives from qualified third parties. The Company has established a data room to provide confidential information to bona fide interested parties and has signed non-disclosure and standstill agreements with a number of these parties.
In addition, the Circular includes details of the grounds for Certicom's application to the Ontario Superior Court for an injunction to stop RIM's hostile take-over bid. This application was filed with the Court earlier today.
Certicom will also be making an application to the OSC for an order to cease trade the RIM offer.
Certicom contends that RIM's access to Certicom's confidential information and its use of that information in connection with RIM's $1.50 hostile take-over bid contravenes non-disclosure agreements signed by RIM in 2007 and 2008 with Certicom. Access to this information also provided RIM with a significant information and timing advantage relative to other parties that may have an interest in entering into an alternative transaction with Certicom.
RIM has not disclosed to Certicom shareholders that it has had the benefit of evaluating Certicom's confidential information and used that information in making its $1.50 offer.
The Directors' Circular is accompanied by a letter to Certicom shareholders summarizing the reasons to reject the RIM offer. The full text of the letter to shareholders follows:
<< December 19, 2008
Dear Certicom Shareholder:
As you know, a wholly owned subsidiary of Research In Motion Limited - RIM - has made an offer to purchase all of the common shares of Certicom for $1.50 per share.
Your Board of Directors has established a Special Committee of independent directors that has engaged financial and legal advisors to consider the RIM offer. After a thorough review, the Special Committee and the Board have unanimously determined that the RIM offer is inadequate and not in your best interests.
------------------------------------------------------------------------- YOUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU REJECT THE RIM OFFER
DO NOT TENDER YOUR CERTICOM SHARES -------------------------------------------------------------------------
We encourage you to review the enclosed Directors' Circular which contains important information about the background to the offer, the factors reviewed by the Board, and the reasons for the Board's recommendation. Those reasons are clear, compelling and numerous. They include:
At $1.50, the RIM bid does not provide you with fair value for Certicom today
- At October 31, 2008, your Company had $0.91 per common share in cash and cash equivalents. In addition, Certicom has tax assets that could be immediately worth approximately $1.07 per common share to a purchaser with significant Canadian taxable income such as RIM. Essentially, RIM is attempting to acquire almost $2.00 in cash and potential tax benefits for $1.50, and would not be paying fair value for the valuable assets and operations of your Company.
The RIM bid undervalues Certicom's unique intellectual property
- Your Company is a recognized leader in the development of the most advanced data encryption technology in the world. It holds or has applications pending for approximately 450 patents that have significant value in a range of industry sectors. For example, the U.S. National Security Agency paid Certicom US$25 million for licenses for use within the U.S. government, and IBM recently signed a multi-year multi-million technology agreement with the Company. Certicom is party to technology agreements with other major parties such as General Dynamics Corporation, Motorola, Inc. and Thales.
The RIM bid does not pay you for the increasing value of Certicom
- Certicom has new executive management and a new strategic plan that is already showing signs of success. On December 3, 2008 - the day RIM announced its hostile offer - your Company reported a 54% year- over-year increase in revenues for the first six months of the fiscal year. Certicom also provided guidance that it expects to: increase revenues by 25% in fiscal 2009 and double revenue within three years.
The RIM bid is considerably lower than comparable transactions
- The Board's financial advisor, TD Securities Inc., reviewed recent acquisitions of companies comparable to Certicom and found the median transaction price was 3.0 times the previous 12 months revenue. RIM is offering less than half that for Certicom - just 1.1 times the prior 12 months' revenue.
The RIM offer is less than the historical and current price of Certicom shares
- While RIM calls its hostile bid a premium offer, at $1.50 it actually represents a significant discount to Certicom's share price since the offer was announced and for most of the past year.
Superior alternatives may emerge from Certicom's value maximization process
- Certicom, with the assistance of its financial and legal advisors, is actively pursuing all alternatives to maximize shareholder value. Discussions with interested parties are under way and a number have signed non-disclosure and standstill agreements to gain access to the Company's confidential information. This process may result in a superior alternative to RIM's undervalued bid before its scheduled expiry on January 15, 2008.
The timing of the RIM bid is highly opportunistic
- RIM's offer was timed to take advantage of the recent and almost universal decline in share prices worldwide and when Certicom's shares were at a five-year low. Further, the offer was announced before markets could respond to the release of Certicom's improved financial results for the first half of the fiscal year - and at a time of year when other interested parties might have difficulty preparing a competing offer before the scheduled expiry time of the RIM bid.
The Board's financial advisors have provided their opinion that the consideration offered to shareholders by the RIM bid is inadequate from a financial point of view
- The full text of the opinion of TD Securities Inc. is attached as Schedule A in the enclosed Directors' Circular.
The RIM takeover bid circular fails to provide proper disclosure
- For example, it does not disclose extensive financial and technical information, or contracts, provided to RIM. It also does not disclose the existence of a non-disclosure agreement under which RIM has received confidential information from Certicom.
The RIM offer is highly conditional, coercive and is not a permitted bid under Certicom's shareholders' rights plan
Individually, any of these factors should be sufficient reason to reject the hostile RIM bid. Combined, the Board of Directors believes these reasons provide overwhelming support for its recommendation that shareholders reject RIM's inadequate and opportunistic offer.
Certicom shareholders who tender to the RIM bid would lose the opportunity to benefit from Certicom's attractive near and long-term growth prospects. As a result, the Board of Directors is convinced that continuing to hold Certicom shares provides better potential shareholder value and is far preferable to accepting RIM's undervalued offer.
All of the directors and officers of Certicom intend to reject the RIM offer. We urge you to do the same. We believe it is your best interests to ensure you receive fair value for your investment in Certicom. The hostile RIM bid does not even begin to provide that value.
Sincerely,
Jeffrey S. Chisholm J. Ian Giffen
Chairman of the Board of Directors Chairman of the Special Committee of On behalf of the Board of Directors Board of Directors On behalf of the Special Committee
------------------------------------------------------------------------- Your Board Recommends that you REJECT the inadequate RIM offer.
For more information please call Georgeson Shareholder, the information agent retained by your Board of Directors, 1-888-605-7621 toll free in Canada and the United States. ------------------------------------------------------------------------- >>
