WiLAN said Monday it won’t go further than the $42 a share offer it made for Mosaid, which is substantially less than the $46 a share offer – a total of $590 million for all outstanding shares — from Sterling Partners that Mosaid’s board accepted last week.
If the deal is confirmed by shareholders, the federal Competition Bureau and Industry Canada, Mosaid would be taken private.
Mosaid owns thousands of semiconductor memory and wireless patents. About 70 per cent of the $80.5 million in revenues from its last fiscal year came from memory licence fees, and the rest from wireless.
A spokesman for Mosaid said deal with Sterling shouldn’t be seen as the loss of Canadian-owned intellectual property.
“The way to look at it is – assuming the Sterling deal goes through – we have a U.S. owner. The company remains headquartered in Ottawa, continues to do business as Mosaid with the current executive team remaining in place,” said Michael Salter, Mosaid’s senior director of investor relations and corporate communications.
“We think it’s a pretty good outcome because unlike in some situations where there’s massive changes and the head office functions depart Canada, that’s not going to be the case here.”
A shareholder vote is expected either in late December or early January. Two-thirds of shareholders have to approve the deal for it to go ahead.
WiLAN, which had $50 million in revenue last year from a range of communications and consumer produce licences and patents, couldn’t be reached for comment.
It began its fight for Mosaid in August, offering $38 a share for all shares, a total of $480 million.
Patents are usually considered dull assets, but not today, especially in the exploding wireless industry. Research in Motion found that out the hard way when it had to pay US$612 million in 2006 to settle a patent fight with NTP. Since then bankrupt Nortel Networks pulled in $4.5 billion for its patents, and in August Google Inc. paid US$12.5 billion for Motorola Mobility – largely, analysts said, for its wireless patents.
In September Mosaid [TSX:MSD] bought Core Wireless Licensing S.a.r.l., a Luxembourg company that holds a portfolio of 400 patent families, consisting of approximately 2,000 wireless patents and patent applications originally filed by Nokia. Mosaid estimated that revenues from licencing them will exceed the $1 billion in revenue it has pulled in since forming in 1975.
Both WiLAN [TSX: WIN; Nasdaq: WILN] and Mosaid regularly go to court to enforce their licences. Most recently Mosaid filed suit in Delaware against Adobe Systems, Inc., Alcatel-Lucent USA, Inc., IBM Corporation, Juniper Networks, Inc., NetApp, Inc., Red Hat, Inc. and VMware, Inc., alleging the seven had infringed its networking patents.
When WiLAN made its initial pitch for Mosaid it said the takeover would create “a strong, licensing champion with the global scope, scale and expertise to compete more effectively in more global technology markets with a combined total of more than 4,200 patents.
“The combined company will have access to capital that will provide greater capacity to grow the business and demonstrate that the combined company has significant resources to enforce its patents through litigation if necessary,” it said in a statement.
On the other hand, it admitted it wouldn’t be able to keep all of Mosaid’s staff, predicting “synergies” of between $5 million and $10 million a year.
Mosaid’s board unanimously rejected WiLAN’s intital offer at the beginning of September, calling it “clearly inadequate and highly opportunistic.” On Oct. 19th, WiLAN blinked and raised its offer.
But last week Sterling, which has offices in Chicago, Baltimore, and Miami, stepped in.
WiLAN, founded in 1992, won’t walk away empty-handed. It owns Mosaid shares and figures it will get $3.6 million back.
Meanwhile, CEO Jim Skippen said in a statement, “WiLAN’s board and management are more determined than ever to continue to build a global IP licensing powerhouse that will generate significant long-term value for investors.”