Creo Shareholders Should Focus on Fairvest Critique of Dissidents' Proposed Governance
Press release from the issuing company
VANCOUVER, British Columbia--Jan. 27, 2005-- Creo Inc. today recommended that shareholders should carefully consider the concerns expressed by Fairvest Securities Inc. in its January 25, 2005 report regarding corporate governance issues arising from the dissident shareholders' plans for the company. However, Creo believes Fairvest, the Canadian arm of Institutional Shareholder Services, Inc., reached the wrong conclusion in its report regarding the election of directors at the company's annual and special meeting of shareholders scheduled for February 10, 2005.
The company noted that Fairvest expressed concerns about the likely negative impact of the dissidents' plan on Creo's operational performance and corporate governance practices. However, its assessment completely fails to address the extraordinary risk posed by the inevitable disruption due to a hostile change of control. The negative impact on the company's sales efforts, employee retention and customer relationships would have an immediate effect on profitability and revenue. This risk would exist even if the dissidents' director nominees possessed the necessary relevant experience and expertise to manage a high-technology company like Creo. Their complete lack of such experience significantly elevates the magnitude of the threat.
Brian Piccioni, a technology analyst with BMO Nesbitt Burns in Toronto, raised the same issue in the January 25, 2005 issue of Business in Vancouver magazine, noting: "I challenge anybody to show me a technology company ... that has been turned around or has been run effectively where senior management has no direct knowledge or experience of technology."(x)
Fairvest commented on a number of governance issues in its report. It noted:
The lack of relevant experience of the dissidents' proposed nominees to the board.
The intention to name Robert Burton as both chair and chief executive officer, contrary to recommended best practices in corporate governance.
The small size of the proposed seven-person permanent board and its inclusion of at least three "close associates" of Mr. Burton. These directors, combined with Mr. Burton as chair, would constitute a majority of the board.
The lack of disclosure of compensation arrangements for Mr. Burton and the fact that, as Fairvest noted, he "has been highly compensated in prior positions...he will not come cheap."(x)
(x) Permission to use quotations was neither sought nor obtained.
Fairvest acknowledges in its report the improved results being delivered by Creo's existing "highly technically skilled and knowledgeable" management team. It also notes that the existing "Creo board and its key committees are independent. Chair and CEO roles are split. Directors and officers hold a significant equity position (10 percent of outstanding shares). Cash compensation is conservative and the Creo board and management are closely aligned with shareholders with respect to their financial well-being."
Creo advises shareholders to consider the Fairvest report with regard to corporate governance matters, the area of Fairvest's acknowledged expertise. However, for a more in-depth analysis of the business strategy being proposed by the dissident, shareholders are urged to carefully review the company's December 28, 2004 proxy circular and its January 25, 2005 response letter to the dissident circular, as well as considering the views of independent analysts having greater experience in technology industries.
Creo shareholders are urged to sign, date and return the BLUE form of proxy today. Please discard any proxy materials you may have received from the dissident shareholders. Shareholders with questions or requiring assistance in voting their BLUE form of proxy can contact Georgeson Shareholder, the firm assisting Creo in the solicitation of proxies at +1-877-288-9604.
The complete Creo management proxy circular and other related materials, including statements from customers in support of the current management and board, can be accessed at www.creo.com/shareholdervalue.
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