Deal certainty
The Board considers that your Proposal does not provide adequate deal certainty, given the significant conditionality attached to it, and given the execution risks involved in the transaction envisaged by your Proposal. In particular, your Proposal does not contain a substantiated explanation on, and analysis of, the envisaged anti-trust clearance procedures, timing, risks and potential remedies you would be prepared to offer to ensure completion of the contemplated transaction. The same applies in respect of any other regulatory clearances that may be required, such as CFIUS. In addition, your draft framework for the merger protocol contains a number of off-market, unclear, unusual and unacceptable terms and conditions, that give further serious concerns on deal certainty.
Stakeholders
Importantly, the Board concludes that your Proposal is not sufficient in addressing the interests of the Company, its business, employees, shareholders and other stakeholders.
We are continually developing our business in response to the constantly evolving needs of our customers, with whom we develop innovative solutions through trusted and long-term relationships. Our business is key to the governments and citizens that we serve in the area of data security, data privacy and confidentiality.
We put a strong focus on developing solutions that help tackle some of society’s major challenges, ranging from financial inclusion to efficient and accessible health and welfare services. We continuously maintain significant commercial and technical investments, as we believe these will contribute over the long-term to the progress of the mobile and digital society for our customers and for citizens. For example our investments contribute to the continuous global interoperability of mobile telephony systems and card payment systems, as well as the global deployment of interoperable digital identity systems that people, companies and governments can trust, such as electronic ID documents and their fully digital equivalents such as trusted digital driver licenses on mobile phones.
Your draft framework for a merger protocol provides only for very limited protection of our stakeholders. This is not in line with market practice, and is not in line with a friendly recommended transaction. In this respect, your Proposal mentions only a small number of general topics, without mentioning actual and concrete commitments. Important non-financial covenants (NFCs) customary for a friendly recommended transaction of this size and nature are not included in your Proposal, including, but not limited to, those on no-redundancies, continued R&D, approach to customers, the employees’ savings plans, the employee share option plan, and the required fair dealing and protection of the interest of any remaining minority shareholders after your offer would be declared unconditional. In addition, the proposed duration of the NFCs is not specified, and the enforcement of the NFCs is not safeguarded post-completion and delisting, leaving our other stakeholders essentially unprotected.
Your approach
We also noted that your approach in making your Proposal is not reflective of a truly friendly and collaborative approach. On 28 November 2017, your first letter on the Proposal was delivered to our CEO without customary preceding explorative discussions. Following our communication to you that we would revert on or before the 15 December 2017, on 11 December 2017 you announced the Proposal unilaterally without prior consultation. In your announcement of the Proposal you also indicated that you will proceed with filing an offer memorandum with the AFM, irrespective of whether or not you have reached agreement with Gemalto.
This sequence of events and the steps you have chosen to take, have led the Board to believe that your approach, contrary to your statements in your announcement of the Proposal, is not friendly and collaborative. Obviously, the nature of an approach and real signs of a true intention to seek the Board’s support are important for the Board’s consideration of any proposal. We have concerns that this could exemplify cultural differences between our two companies.
Conclusion
After its thorough and careful review, our Board has determined that your Proposal does not, from the perspective of Gemalto, have a sufficiently substantiated strategic rationale and fails to adequately address the consequences it will have for Gemalto’s business. Furthermore, the Board has determined that your Proposal significantly undervalues the Company, is highly conditional and uncertain and fails to adequately address the interests of our various stakeholders. As such, your Proposal does not form a basis for constructive engagement.
Thank you for your proposal and for your interest in our Company.
Very truly yours,
Alex Mandl – Chairman of the Board, Phillipe Vallée – Chief Executive Officer