Micrel calls Obrem statements inaccurate, questions investor's motives

By Lisa Kerner

Charlotte, N.C., April 1 - Micrel, Inc., in reaction to Obrem Capital Management, LLC's attempt to take control of the company's board of directors, sent an open letter to its stockholders refuting what Micrel calls Obrem's "inaccurate and self-serving assertions."

On March 26, Obrem, a 14.9% shareholder, announced it had called a special meeting of Micrel shareholders to be held May 21 for the purpose of, among other things, removing Micrel's five current directors under article 3.4 of the company's bylaws.

In its letter to shareholders, Micrel's board acknowledged challenging market conditions but highlighted the company's accomplishments, including:

• Increased revenue in 24 out of 29 years;

• Improved GAAP gross margin from 39.5% to 57.1% and operating margin from 2.4% to 18.4% between 2003 and 2007;

• Generated cash flow from operations of some $580 million over the past 10 years; and

• Repurchased over $280 million in stock, or 25% of its outstanding shares, since the inception of its share repurchase program.

Micrel said it believes Obrem's statements about the company's cost structure and operating margins reflect the shareholders lack of in-depth knowledge about the industry.

The letter accuses Obrem, a very recent Micrel investor, of using a "cherry-picked" set of comparables to make its case against Micrel.

Micrel also pointed out its investment in future growth with the development of its patent-pending Hyper Light Load power capability and the Super LNR devices, as well as what the company believes are the world's fastest switching regulators.

While Micrel introduced 82 new products in 2007 and amassed a large patent portfolio, the company admitted the potential of these products is not reflected in Micrel's stock price.

"In our opinion, Obrem's assertions about the company's growth and margins completely miss a key point - our investments are positioning the company to outpace industry growth," Micrel's letter said.

The letter also questioned whether Obrem was attempting to secure its own near-term gain without considering the interests of all Micrel shareholders.

Micrel's board said it planned to keep shareholders apprised of its progress.

Obrem fires back

Obrem, in its own April 1 open letter to fellow Micrel stockholders, said it was disappointed that Micrel management chose to "attack" Obrem rather than address what the investor said is its primary concern: creating permanent value for stockholders.

The investor accused Micrel of improperly blaming the semiconductor market conditions for its ongoing underperformance, citing the strength of the analog semiconductor industry over the past five years, and stood by its claim that Micrel's operating performance lags its peer group.

Obrem also denied any attempt to remove Micrel chief executive officer Ray Zinn but added that during the past 10 years under Zinn's leadership, "there has been a decrease in Micrel's share price and no tangible value creation for stockholders."

"Micrel makes several inaccurate assertions in an attempt to disparage our nominees," Obrem said in its statement.

Contrary to Micrel's assertion that its nominees have limited semiconductor industry and operating experience, Obrem said two of its nominees, Keith Kolerus and Bill Bradford, collectively have 60 years of semiconductor industry experience in leadership roles.

Kolerus was chairman of the board of ACI Electronics from 2003 to 2008, and Bradford was most recently senior vice president of global sales at Freescale Semiconductor from 2006 to 2007.

Obrem is seeking the election of its six nominees to Micrel's board and wants to cancel the recently adopted shareholder rights plan. In a prior letter to Micrel, Obrem suggested the company consider strategic alternatives, including a sale of Micrel.

The investor's nominees for election to the Micrel board are:

• Bill Bradford, a co-founder and general partner of Saguaro Ventures;

• Keith R. Gollust, a founding partner of Gollust, Tierney, and Oliver, a private investment firm;

• Eric Gomberg, a senior investment analyst at Obrem Capital Management;

• Ben Goren, a principal at GCG Capital;

• Keith M. Kolerus, former chairman of the board of ACI Electronics; and

• Andrew Rechtschaffen, founder and managing member of Obrem Capital Management.

Micrel develops and manufactures high-performance analog power integrated circuits (ICs), mixed-signal ICs and digital ICs. The company is based in San Jose, Calif.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.