Orthofix Shareholder Calls for Sale of Blackstone
BY LAUREN UZDIENSKI, DECEMBER 3, 2008
In a letter to Orthofix shareholders released this morning, Ramius LLC criticized the company's "irresponsible" management and called the Blackstone acquisition " a failure." Ramius, a fund that holds 4.7% of OFIX's stock, called for the sale of Blackstone as well as the replacement of four unnamed Board members with Directors who have the "appropriate skills and fortitude" to turn the company around.
"The acquisition of Blackstone Medical has not panned out as management had forecasted," Ramius says, noting that Blackstone is currently generating material operating losses and negative free cash flow. Before the purchase, Orthofix was essentially debt-free and is now saddled with heavy debt, the impact of which was only temporarily stayed by recent amendments to its credit facility.
Calling the acquisition a "failure from the outset," Ramius continues with accusations that "management failed to address critical risk factors during due diligence, failed to implement and execute a viable operating plan, and, in light of the recent restructuring announcement, have once again failed to take sufficient action."
Ramius' solution is for Orthofix to proceed with the immediate sale of Blackstone and change the composition of the Board. To the latter effect, Ramius is calling for a special general meeting of shareholders to replace four Board members.
The letters was signed by Jeffrey C. Smith, Partner and Peter A. Feld, Managing Director at Ramius.
Ramius believes that with the outlined changes, OFIX shares could be valued at $25, a 114% increase over yesterday's closing price. Over the past year, OFIX has been down 77%.
The stock was up 20% in early trading.
