Dissident action unwarranted
CAMBRIDGE, ON, Sept. 7 /CNW/ - ATS Automation Tooling Systems Inc., today sent the following letter to its shareholders in response to a Dissidents' Circular filed September 5th, 2007 by two hedge funds, Goodwood Inc. and Mason Capital Management, LLC.
The full text of the letter follows:
September 7, 2007
Dear ATS Shareholder:
Late Wednesday afternoon two hedge funds filed a dissidents' circular in which they ask ATS shareholders to vote against the re-election of the current Board of Directors and instead vote to elect a new slate of directors dominated by members of these two firms.
We believe that this action is unwarranted, unnecessary and runs counter to the best interests of ATS shareholders. A proxy contest at the 11th hour that offers no new ideas is a needless distraction that can only disrupt and delay the ongoing execution of ATS's strategic plan, which is building significant positive momentum.
The Board of Directors urges you to discard the dissident proxy and vote FOR the re-election of ATS's current directors at the company's Annual General Meeting, which will take place, as scheduled, on Thursday, September 13, 2007.
Over the past several months we have held regular discussions with both firms, Goodwood Inc. and Mason Capital Management, LLC, regarding the company's strategic direction and near-term plans, and they have expressed support for the plan we are now executing.
Now, by their actions, they are working to disrupt that plan and impede our progress. What many shareholders may not appreciate is that this is not the first time Goodwood and Mason have worked contrary to the best interests of ATS and its shareholders. As discussed below, they played an instrumental role in causing ATS to withdraw the Photowatt IPO. This withdrawal now lies, inappropriately, at the heart of their criticism of the current Board and management.
Our Strategic Plan is On Track
The fundamental issue for ATS shareholders is whether to continue building on the positive momentum ATS has created in recent months. The alternative is to permit Goodwood and Mason to lead ATS - a global manufacturing solutions company with more than 3,500 employees and customers that include the world's largest and most demanding multinational corporations - on a detour that would see ATS install a new Board of Directors and interim management team while at the same time somehow moving "more quickly" on the initiatives your current Board and management team are already implementing as expeditiously as possible.
We think the choice is clear.
Building Positive Momentum
Over the past two years ATS has significantly strengthened its core operations and sharpened its strategic focus. During this period, we have:
- Implemented a global business strategy;
- Closed three underperforming Automation Systems Group (ASG) factories and reduced our North American workforce by 21%;
- Opened three new ASG facilities in Asia, doubled our Asian workforce to 400, and upgraded established factories in China and Singapore, all in response to challenges in the North American automotive industry and the global migration of manufacturing to lower cost countries;
- Established stronger regional management teams in North America, Asia and Europe; and
- Significantly restructured and revitalized the Precision Components Group (PCG), including the sale or closure of three factories, to enhance the value of this business.
Building on these accomplishments, ATS set three key strategic priorities in June 2007 when it announced plans to:
- Focus on becoming the world's best automation company by building on the many strengths of our core ASG business;
- Enhance Photowatt's value to ATS shareholders and position it for long-term success; and
- Pursue strategic alternatives for PCG, including a sale of the business.
Since June, among many other achievements, we have:
- Announced two consecutive quarters of significantly improved automation order bookings and posted a 23% increase in year-over-year order backlog levels - clear evidence of improved performance within our core ASG business;
- Hired Jim Rowan, a world-class executive with a 25-year track record of success in building and managing global manufacturing companies, as President of ASG, and made several other key management appointments;
- Strengthened Photowatt by raising $110 million of new investment capital through a successful rights offering, securing a fourth long-term silicon supply contract, and approving a plan to spin out Photowatt to ATS shareholders as soon as the necessary tax ruling and shareholder approval have been obtained;
- Engaged a leading international executive recruiting firm and conducted an extensive search that resulted in the identification of an outstanding candidate for the CEO position at Photowatt. This individual is a French citizen who currently serves as a senior executive with a publicly-traded company and who has significant experience in the renewable energy and photovoltaic power sectors. We are currently in the process of finalizing an employment agreement with this individual; and
- Engaged Scotia Capital with a mandate to pursue a sale of PCG and commenced discussions with potential buyers.
The bottom line is that our plan is working. We are building positive momentum operationally, strategically and financially as we move to extend our gains in our core automation business under a new management team, complete the spin-out of Photowatt and conclude a successful sale of PCG.
Last Minute Proxy Challenge is Disruptive and Counterproductive
We share the dissidents' desire to execute our plan as quickly as possible, but we fail to see how a disruptive proxy contest or a new Board of Directors will help achieve that goal. ATS's ability to succeed requires focus, attention to detail and the support and guidance of an expert Board of Directors that understands our business and is up to speed on the many moving pieces involved in executing on our plan.
ATS has such a Board, and it includes three independent and highly qualified directors who joined within the past two years, bringing fresh perspective and expertise. These directors are joined by four longer-serving members who are also eminently qualified and have deep knowledge of ATS and the global automation industry.
Goodwood and Mason propose to replace this Board with seven new directors, only three of whom are independent of Goodwood and Mason and none of whom has any significant experience in the global automation industry. We do not believe this group is well qualified to serve the best interests of ATS or its shareholders.
Many Criticisms, No Plan
In their circular, Goodwood and Mason level a number of criticisms against the current Board and management. While there is no question that the past few years have been challenging for ATS, many of these criticisms are self-serving and wither upon closer examination.
- "The Spheral Solar Debacle". In their circular, Goodwood and Mason criticize ATS's decision to make a significant investment in Spheral Solar. This is classic Monday morning quarterbacking. ATS's investment in Spheral Solar should be viewed within the context of ATS's overall investment in solar power, which has been a demonstrable success for ATS and its shareholders.
For example, in 1997, long before solar power was on the investment community's radar screen, ATS made a strategic decision to enter this business through the acquisition of Photowatt France for $17 million. This early decision was also not without risk but has proven to be enormously successful over time.
- The "Costly Failed Photowatt IPO". Goodwood and Mason blame the failure of the Photowatt IPO on ATS's Board of Directors, ATS's senior management, Photowatt's management, and ATS's underwriters. Notably excluded from this list is Goodwood and Mason themselves, both of which we believe played a significant role in its failure.
Prior to cancellation of the IPO, Goodwood and Mason were lobbying ATS management to proceed instead with a rights offering that would provide better value to them, including an opportunity to build their positions in ATS at a reduced price while receiving a significant fee for agreeing to backstop the offering.
Then, in the final days and hours of the Photowatt IPO marketing process, both firms cancelled large orders to purchase Photowatt shares they had placed with the underwriters. We believe the last minute removal of their orders led to a loss of investor confidence, created confusion in the market and contributed significantly to the cancellation of the offering.
It is therefore disingenuous at best for Goodwood and Mason to blame the failure of the Photowatt IPO on everyone but themselves.
ATS remained committed to achieving its longstanding goal of positioning Photowatt as a successful standalone company. In August 2007, ATS successfully completed a $110 million rights offering, albeit with additional expense, including $2.3 million in fees paid to none other than Goodwood and Mason in exchange for their agreement to backstop the transaction. Furthermore, the delay in raising this capital due to the cancellation of the IPO caused Photowatt to have to postpone its expansion plans.
Goodwood and Mason's other criticisms can be dealt with as follows:
- In addition to all of the actions and accomplishments noted above, ATS has hired Jim Rowan, an accomplished senior executive with 25 years of experience in the global manufacturing industry to lead the ongoing revitalization of ATS's core Automation Systems Group.
- ATS's President and CEO maintains the full confidence of the Board of Directors. It is the Board's view that the current CEO is the right person to lead the execution of ATS's value creation plan. It is also the Board's view that his qualifications to do so are unquestionably superior to the individual Goodwood and Mason suggest in their circular would be their choice to serve in some sort of interim senior executive capacity should they succeed in gaining control of the Board.
- ATS prides itself on the quality and transparency of its disclosure, including that disseminated in accordance with applicable statutory regulations over the course of the prolonged marketing period spanning the Photowatt IPO and ATS rights offering.
- ATS has already identified PCG as non-core and is in the process of selling the business.
- ATS has significantly enhanced and strengthened its management team in recent months and is near to finalizing the hiring of a new CEO for Photowatt, as mentioned above.
- Finally, the interests of ATS's Board and management are aligned with ATS shareholders. ATS's executives and directors are subject to minimum shareholding requirements and directors have elected to receive significant portions of their compensation in deferred stock units (DSUs).
Goodwood and Mason make reference to the fact that Mr. Jutras sold a portion of the rights received by him through the rights offering. They neglect to mention, however, that Mr. Jutras sold those rights in order to partially fund the exercise of the remainder.
Since being appointed CEO in February 2005, Mr. Jutras has increased his share ownership of ATS by more than 27,000 shares. He currently owns (directly or indirectly) 106,932 shares.
Keep the Positive Momentum Going - Vote FOR the Re-election of the ATS Board
There is no question that the last two years have been challenging ones for ATS, but the past is not the issue. The issue is the future and on that score we have a clear plan for creating shareholder value, Goodwood and Mason have told us they support that plan, and we are delivering results against the plan and the strategic priorities we set back in June.
Goodwood and Mason are offering you nothing more than a promise to do the same things, but faster. Much as we share their desire to see tangible results more quickly, we believe their position is naïve and their ability to deliver on their promise is poor, at best.
Don't let the dissidents set us back now. We have created positive momentum on our strategy and in our business. Let's keep it going. Reject the dissidents' appeals. Vote FOR the re-election of the ATS Board of Directors.
ATS recommends that all shareholders discard any dissident proxy you might receive and vote only your Management proxy in favour of the slate of directors as listed in our information circular. Regardless of how many shares you own, it is important that you vote. Proxies must be returned no later than September 11, 2007 at 10:00am Toronto time for your vote to count.
A copy of ATS's current Annual Report and Management Information Circular for the September 13, 2007 meeting can be found on SEDAR at www.sedar.com, and at ATS's website at www.atsautomation.com. Requests for a hard copy of the Annual Report or Management Information Circular can also be made to Georgeson.
Due to the limited time available shareholders should vote using one of the quicker options available as noted on the management form of proxy, preferably by telephone voting, Internet or fax where applicable.
For more information or assistance with voting your proxy call Georgeson, ATS's proxy solicitor toll free at 1-888-605-7636.
Thank you for your continued support.
Lawrence G. Tapp
Chairman of the Board
Ron J. Jutras
President and Chief Executive Officer
ATS Automation Tooling Systems Inc. provides innovative, custom designed, built and installed manufacturing solutions to many of the world's most successful companies. Founded in 1978, ATS uses its industry-leading knowledge and global capabilities to serve the sophisticated automation systems' needs of multinational customers in industries such as healthcare, computer/electronics, automotive and consumer products. It also leverages its many years of repetitive manufacturing experience and skills to fulfill the specialized repetitive equipment manufacturing requirements of customers. Through its Photowatt solar business, ATS participates in the growing solar energy industry and through its precision components business it produces, in high volume, precision components and subassemblies. ATS employs approximately 3,500 people at 24 manufacturing facilities in Canada, the United States, Europe, southeast Asia and China. The Company's shares are traded on the Toronto Stock Exchange under the symbol ATA. Visit the Company's website at www.atsautomation.com.
Forward Looking Statement
This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of ATS, or developments in ATS's business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things: execution of ATS's strategic plan and positive momentum in its strategy and in its business; its focus on building and extending its gains in its Automation Systems Group; its enhancement of Photowatt's value; the completion of the spin-out of Photowatt; and the potential sale of PCG. The risks and uncertainties that may affect forward-looking statements include, among others: general market performance and restructuring within the North American automotive market; the receipt of all necessary approvals and advance tax ruling relating to the Spin Out; the state of the capital markets; foreign currency and exchange risk; strength of the Canadian dollar; performance of the market sectors that ATS serves; that some or all of the trends towards automation that ATS believes are attractive dissipate or do not result in increased demand for automation; risks associated with operating and servicing customers in a foreign country; that multinational companies withdraw from global manufacturing for business, political, economic or other reasons; unforeseen problems with the implementation of the ASG strategic initiatives or failure of those measures to bring about improved performance at ASG; the success of ongoing operational improvements at ASG; problems associated with the expansion of production capability and adoption of new production processes at Photowatt; managing the impact of supply shortages and higher prices for polysilicon; Photowatt's ability to improve efficiencies of its solar modules produced using lower grade polysilicon or refined metallurgical silicon; Photowatt's ability to secure additional long-term polysilicon supply contracts; the reduction in government incentives in Germany and its effect on Photowatt; inability to advance collaborative development arrangements focused on increasing power efficiencies of solar cells; political, labour or supplier disruptions in manufacturing and supply of silicon; the ability of ATS to exit the remaining PCG operations; and other risks detailed from time to time in ATS's filings with Canadian provincial securities regulators. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and ATS does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.
For further information:
Carl Galloway, Vice President and Treasurer
Gerry Beard, Vice President and Chief Financial Officer
Josh Pekarsky, Longview Communications
Alan Bayless, Longview Communications