While ZIGO management is trying to sell this merger on the grounds that it will open up new sales markets, I'm starting to believe that what is driving this merger is the special compensation that ZIGO executives especially CEO Bruce Robinson would receive. From his statements in conference calls dating back to 2004, I believe Robinson has long thought ZIGO's stock price would be significantly higher by now. But this latest down period has made his stock & stock options worth far less than his worst nightmares. At 66 years of age, I think Robinson has changed his plans for a big payday at retirement. Instead of getting his retirement from a much higher ZIGO stock price, he plans to get it from the additional compensation he will receive from this merger going through. How much compensation has yet to be disclosed.
Normally, this would be too much "conspiracy theory" for me but then give me another reason to sell a profitable company for less than its tangible book value. When asked by Darice Liu about "this pricing rationale" at the 30:19 mark of the conference call, ZIGO CEO Bruce Robinson response was, "I think Darius that it's very difficult in this environment and the market today to determine that you're looking at one day, we've been talking to ESI for a number of years ... going back, I think Nick and I, 3 years probably, we've been discussing possible things we could do together and if you look at it from a historic standpoint over those 3, 4, 5, 6 years, Zygo shareholders I think have received a fair and reasonable return and premium for our company." (If the first part of this response seem unintelligible to you, I urge you to listen to the call at Zygo's web site.) Darice Liu, for her part, downgraded Zygo a few hours later.
For my part, I think his answer is gibberish and makes me think he isn't revealing his true reason for selling.
I listened! I am going to vote against the merger. Something is wrong with this transaction. And they do it when Zygo is most depressed in price. I really think that some other offer will come along.
All the heavy spending on R&D ($50 million over the last two years which is equivalent to $3/share) that Zygo has undertaken and the Zygo shareholders get nothing from it. If Zygo had spent a more normal level of R&D it would have earned an easy $1.50/share per year. Zygo shareholders have paid a price (depressed share price) because of the extra R&D the company has undertaken in the last two years. Now we get nothing for it. They sell out at book value!
If they offered 1.3 shares for each share of Zygo I would be more open to the merger. At least at $13, many/most shareholders would at least breakeven on the transaction if they didn't want to take the ESI shares. At 1.02 shares, nearly all shareholders are underwater. Worst of all is to set the ratio before ESI has announced their expected shortfall in revenue and the very poor bookings. Unbelieveable! The thing we really have to be careful of is that ESI shareholders should really like the deal. They get to buy a profitable company for less than book value, and from what I understand, some really great technology and IP. I sure hope some institutional shareholders don't let this go through. I am quite certain that Zygo has been working with Intel on some 32nm and 45nm products. I was under the impression that these inline system products were either close to acceptance or already accepted. I have heard nothing but good things about these products. The best thing is that they are leading edge technology products where the purchase is not delayed due to poor economic conditions. (Intel and other semiconductor companies have recently begun to purchase 45nm and 32 nm products). Zygo has said nothing but great things about these products. Unless something has really changed over the last month, it makes no sense to sell out/merge at this time. Did they not tell the truth about these products?
I will hold the shares I have and hope a white knight comes along. Plus, I plan on trying to find out more about why Zygo would let the company go at this price. Even if sales have fallen off a cliff for Zygo in the last month or two (and I don't know that they have), you don't sell a company based on a quarter or two of sales.
Look at a chart showing the Zygo share price. Focus on the last week. ESI made a big issue about paying a 36 percent premium to Zygo shareholders. Were they being opportunistic? Think about it! The price of Zygo stock closed under $10 for only 21 trading days in the last 2 years. It closed under $9 on only 5 days in the past 2 years. It closed under $8 on only 2 days in the past 5 years (the two days when most stocks sank like rocks). And they want us to be happy with a 36 percent premium a day or two after the stock fell 25 percent! That was the worst part of the conference call, when they 'bragged' about paying a 36 percent premium. ESI and Zygo management and board members must really think Zygo shareholders are idiots.
I just want them to explain the reasoning behind the price. If they have good reasons, I can accept it. Right now, I just think this is another example of something crooked in the financial world. -