OPEN
LETTER TO CUSTOMERS, PARTNERS, EMPLOYEES AND STAKEHOLDERS
We are
delighted to share with you the news that Lineage
Power Holdings, Inc. (Lineage), a Gores Group company,
has signed a definitive agreement to acquire all of the outstanding shares of
PECO II for $5.86 per share in cash. The transaction is subject to
the approval of PECO II stockholders. The companies anticipate that
the transaction will be completed in the second calendar quarter of
2010. You can refer to the 8-K filed with the SEC for more
information. We will keep you informed of new developments as they
occur.
The
combination of Lineage Power and PECO II is a strategic, complementary fit that
creates a stronger and more capable, end-to-end energy systems and services
provider focused on delivering the industry’s best customer
experience. Combining the two companies’ strengths should expand our
ability to deliver cost-effective, reliable and energy-efficient power solutions
for telecom central offices, mobile switching centers, outside plant, data
centers and cell sites. Together, our US-based engineering, design,
qualification, and professional services thought leaders will deliver solutions
purpose-built to exceed rigorous North American telecom standards, backed by
decades of proven product strength and a Bell Labs heritage of
innovation.
Once the
transaction is complete, we expect:
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Lineage customers can benefit from an expanded product and services
portfolio; battery distribution fuse bay (BDFB/BDCBB) products; and
leading power inverter solutions.
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PECO II customers can benefit from Lineage Power’s extensive North
American engineering and product qualification infrastructure; and Total
Efficiency™ architecture that recaptures energy loss and lowers cooling
requirements to reduce greenhouse gas emissions and achieve sustainability
objectives.
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Together, our products and nationwide service infrastructure will
create one of the largest and most capable professional services
organizations for telecom power in North America. Customers can
optimize power plant sourcing while reducing utility and cooling costs to
help scale optical, wireless and broadband networks at lower relative
costs. An expanded global manufacturing scale will provide
world-class quality and delivery at competitive
prices.
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Customers
can continue to invest in the current products from both PECO II and Lineage
Power. Continuous supply of both product portfolios is expected to
remain unchanged. Existing contract terms remain
unchanged.
It is
expected that the engineering, professional services, sales, solution
engineering, support and training resources you work with every day will
continue to support you and your installed base of products. We remain committed
to investing in research and development to deliver new products. The
combined company can better serve the installed base with comprehensive,
US-based engineering, product qualification, and support services.
The
engineers at Lineage and PECO II are the best in the industry, responsible for
hundreds of global patents and unique planning and design services expertise
that ensures every system installed leverages existing infrastructure
investments while optimizing future performance and capacity. No
changes are anticipated to the support, marketing or selling of particular PECO
II or Lineage Power products. We envision leveraging best practices
from both organizations to ensure the industry’s best customer
experience. Ultimately, the driver in all of our decisions will be
the needs of our customers. Service, maintenance,
warranty and support contract terms remain unchanged.
Unique
Solution
Today's
announcement opens a new chapter in Lineage Power’s 95+ year heritage of
patented innovation as part of AT&T, Bell Labs, Lucent Technologies and
Western Electric. The thought leadership of Lineage Power and PECO II employees
will remain focused on creating customer value and building energy systems
solutions that leave no power plant behind. The first name in power,
Lineage will remain the only North American provider with US-based research and
development.
Strong
Foundation
This
combination will leverage the core competencies of two respected industry
leaders to strengthen the technological and financial foundation for delivering
DC power conversion solutions. With the addition of PECO II, Lineage Power
expects to significantly expand its current market presence and future market
opportunity by delivering the industry’s best customer experience through
world-class execution. In alignment with customer needs, analyst
recommendations and industry standards efforts, our technology platforms will be
strengthened and accelerated providing the financial foundation to appropriately
address strategic objectives and explore exciting new
opportunities. As PECO II joins Lineage Power, we believe we will be
the perfect sized organization – large enough to be a global player, yet small
enough to have direct access to our developers and executives.
Ready-to-Ship Solutions
Today
Lineage
Power and PECO II products already co-exist in many customer environments. We
expect customers will be able to extend their existing investment in one product
line to the other. While we will explore opportunities after the transaction
closes to build a more powerful joint solution set - it is also an important
reminder that each product portfolio is well respected for its individual
reliability and management capabilities. Ultimately, the driver in
all of our decisions will be the needs of our customers.
Customer
Focused
PECO II
and Lineage Power share the corporate culture that there is nothing more
important than our customers. Our goal is to become your favorite
vendor by delivering on our promises – on-time and on-budget – by helping you do
your job better and spend less time doing it. We will measure our
success by your satisfaction. We can assure you that together we will
earn the right to your business. We will compete fairly on value, technology,
domain expertise, and customer support to maintain the honesty, integrity and
respect that you would expect of a world-class company.
We invite
all PECO II customers, partners and prospects to visit the Lineage Power
facilities in Plano, TX. It is the R&D, quality assurance, and
performance testing conducted in Plano that gives Lineage Power the ability to
lead the way in the delivery of safe, reliable and energy efficient solutions
that lower costs and accelerate delivery of new voice, video and data subscriber
services.
We would
like to extend a personal thank you for your continued loyalty and support
during these times of change at PECO II and Lineage Power. Our
passion is to build companies that last – with this in mind, we are focused on
becoming the best power conversion company in the world. The quality of the
relationships with our customers will be our indicator of success. All of us
here at Lineage Power and PECO II look forward to working with you for the
future benefit of all our organizations.
If you
have any further questions or concerns we encourage you to contact Lineage Power
at 877-LINEAGE or +1 972 244 9288; or PECO II at 800-999-PECO or +1 419 468
7600. Please also feel free to contact Lineage Power CEO Craig Witsoe
directly at +1 972 244 9358 or send an email to craig.witsoe@lineagepower.com.
Forward-Looking
Statements
Statements
in this communication that are not historical fact are forward-looking
statements, which involve risks and uncertainties that may cause actual results
or events to differ materially from those expressed or implied in such
statements. For example, although PECO II and Lineage have signed an
agreement for a subsidiary of Lineage to merge into PECO II, there is no
assurance that they will complete the proposed merger. The proposed
merger may not occur at all if the companies do not receive necessary approval
from PECO II’s shareholders, or if it is blocked by a governmental agency, or if
either PECO II or Lineage fail to satisfy other conditions to
closing. Other risks and uncertainties to which PECO II is subject
are discussed in its reports filed with the SEC under the caption “Risk Factors”
and elsewhere, including, without limitation, its Annual Report on Form 10-K for
the year ended December 31, 2008 (filed March 31, 2009); and its Quarterly
Reports on Forms 10-Q for the fiscal quarter ended March 31, 2009 (filed May 15,
2009); for the fiscal quarter ended June 30, 2009 (filed August 14, 2009); and
for the fiscal quarter ended September 30, 2009 (filed November 13,
2009). This communication contains time-sensitive information that
reflects management’s best analysis only as of the date of this
communication. PECO II does not undertake any obligation to publicly
update or revise any forward-looking statements to reflect future events,
information, or circumstances that arise after the date of this
communication.
Additional Information and
Where to Find It
In
connection with the proposed acquisition of PECO II by Lineage, PECO II intends
to file relevant materials with the SEC, including its proxy statement on
Schedule 14A. Shareholders and
investors are advised to read all relevant documents filed with the SEC,
including the proxy statement, because they will contain important information
about the proposed transaction. Shareholders and investors may
obtain a free copy of the proxy statement (when available) and other documents
filed by PECO II with the SEC at the SEC’s website at
www.sec.gov. Free copies of the proxy statement (once available) and
PECO II’s other filings with the SEC, may be obtained by directing a written
request to PECO II, Inc., Attention: Jocelyn Koozer, 1376 State Route 598,
Galion, Ohio 44833.
Participants in the
Solicitation
PECO II
and its directors, executive officers and other members of its management may be
deemed to be soliciting proxies from PECO II’s shareholders in favor of the
proposed transaction. Investors and shareholders may obtain more
detailed information regarding the direct and indirect interests in the proposed
transaction of persons who may, under the rules of the SEC, be considered
participants in the solicitation of PECO II’s shareholders in connection with
the proposed transaction by reading the preliminary and definitive proxy
statements regarding the proposed transaction, which will be filed with the
SEC.