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Microsemi to fight Zarlink shareholder rights plan

By Trish Nixon

(Reuters) - U.S. chipmaker Microsemi Corp is challenging a takeover defense adopted by Zarlink, the Ottawa-based rival it is trying to buy with a hostile bid valued at C$550 million ($561 million).

Zarlink, which has rejected the bid and is seeking higher offers, said on Friday that Microsemi was challenging its shareholder rights plan - the so-called poison pill takeover defense - at the Ontario Securities Commission (OSC), Canada's main securities regulator.

"The rights plan is intended to ensure that Zarlink has time to bring its previously announced process to its conclusion for the benefit of shareholders and debentureholders," Zarlink Chairman Adam Chowaniec said in a statement.

Zarlink's board adopted the poison pill, which is triggered if any one shareholder buys 20 percent or more of the company, on July 25.

The OSC will hear Microsemi's application to challenge the plan on October 3 and 4. The California-based company, which has been courting Zarlink since the beginning of the year, could not be reached for comment on Friday.

Zarlink has insisted the C$3.35-a-share Microsemi bid is opportunistic, and in July began a strategic review process in search of a better offer. Earlier this month the company announced it was in talks with at least 15 potential buyers, and expected a superior offer would emerge.

The market also seems confident of a higher bid - Zarlink's stock has traded consistently above the offer price since Microsemi made its interest in Zarlink public in July.

"The company is worth more, and I think there are some active bidders," said one analyst who follows the company and who spoke on condition of not being named due to the sensitivity of the matter.

Zarlink has not identified any of its suitors, saying only that parties are interested in the company as a whole or in its parts.

In Friday's press release, Zarlink reiterated the board's unanimous recommendation that holders of shares and debentures reject the Microsemi offer. It said it would "make an announcement at the appropriate time to provide a further update on the process".

At midday on Friday, shares of Zarlink were down 1 cent at C$3.55 on the Toronto Stock Exchange.

Microsemi's bid expires on September 22 but can be extended.

($1=$0.98 Canadian)

(Reporting by Trish Nixon; editing by Peter Galloway)

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