The proxy battle for control of Zarlink Semiconductor has been won, but concerns about 'irregularities' during the proxy voting process could mean the war is yet to come.

Zarlink's management scored a victory at its annual general meeting today over a dissident group of shareholders seeking to oust CEO Kirk Mandy, chairman Henry Simon and several other directors, with the incumbent team winning about 60 per cent of the proxy votes.

However, the shareholders' group, led by fund manager Scott Leckie and represented on the legal front by local law firm LaBarge Weinstein, was unwilling to concede defeat and argued there was a huge discrepancy between the voting pattern of the U.S. and Canadian shareholders, indicating that some proxy holders might not have received the dissident circular mailed out by a third-party firm in time for the voting deadline.

The group also said it had asked the management for two lists naming the brokers and non-objectant beneficial owners of Zarlink stock in the U.S. so that it could contact them and find out if they had received the information, but that the company had not given the lists to the dissident group.

"The likelihood is that the materials were not mailed out on time and not received in the U.S.," said Wes Hall, CEO of proxy solicitation firm Kingsdale Shareholder Services Inc., which worked with the Leckie group.

LaBarge Weinstein partner Debbie Weinstein pointed out that while the dissident slate had received roughly 54 per cent of all Canadian proxy votes, it had only obtained five per cent of the U.S. votes. Ms. Weinstein, who entered the meeting shortly after Mr. Simon had already begun speaking, had called for the meeting to be adjourned until later in the afternoon to look into the irregularities, but shareholders present at the meeting voted down the motion and asked for the AGM to proceed.

Of the nominees, Hubert Lacroix received 85.2 million votes, J. Spencer Lanthier received 78.3 million votes and Adam Chowaniec got 65.9 million. All three were included on the slates of both the management and the dissident group, although Mr. Chowaniec told the OBJ that he was a "little confused" by his selection by the shareholders' group since he said he had never been formally asked by the group nor had he ever consented to be on its slate. Mr. Chowaniec has been appointed vice-chairman to oversee and refine the company's strategic plan.

Among the management nominees, Oleg Khaykin received the next-highest number of votes at 50.8 million, followed by Mr. Simon at 50.3 million and Mr. Mandy at 50.2 million. Both Dennis Roberson and Jules Meunier got about 38.2 million votes each.

Four of the dissidents' nominees – David Banks, Neil Carragher, Kalai Kalaichelvan and Daniel Owen – each received about 34.6 million votes, while Luke Smith got 27.6 million votes.

Although the dissident group said it might pursue litigation against Zarlink's management, Mr. Simon said in a meeting with reporters after the AGM that he was happy to get on with the business of the company and had no interest in launching a similar action against the group.

"It's a detraction for management," he said.

Mr. Simon added that there are no plans to work with the group, since it has not laid out any concrete strategy.

"They haven't made any case for the competence of their nominees; they do not have the proper qualifications ... frankly, what surprised me is that they didn't start with a discussion, but with a bombshell. I expected them to be more professional."

However, Mr. Leckie said in an interview that he would fight the results of the vote: "I'm not going away ... we're not certain yet it's a defeat based on the peculiarities between Canada and the States.

"They have $100,000 of positive cash flow - that's nothing. And the cost structure is still out of whack with revenues, there's still the same dysfunctional leadership and they have a convertible bond which is a ticking time bomb."