Comverse Technology Inc. (Pink Sheets: CMVT.PK) said that its Ulticom Inc. (Pink Sheets: ULCM) subsidiary has agreed to be bought by private equity firm Platinum Equity at $8.07 per share, a 5% premium above the closing price on Monday, October 11.
The deal values Ulticom at $90 million. The transaction price comprises a $5.74 special dividend, and an additional $2.33 per share in cash.
Comverse is headed by CEO Andre Dahan.
Ulticom president and CEO Shawn Osborne said, "After a careful and extensive review of our strategic alternatives, our board of directors has determined that the premium to the current market price provided by this transaction offers the best value for our stockholders.”
It will be recalled that, two months ago, Comverse Technology hired investment bank Goldman Sachs to examine M&A options, including of the parent company, currently traded at a market cap of $1.5 billion.
At the end of July, Ulticom had $76.8 million in cash, so that the transaction does not reflect a high valuation for its activity. Several law firms in the US announced on Tuesday that they intended to examine whether the Ulticom board acted properly and for the benefit of Ulticom's shareholders when it approved the deal with Platinum, and they called upon the company's shareholders to contact them to clarify their rights.
Ulticom will convene a shareholders meeting on December 2, at which the shareholders will be asked to approve the deal. This will require a majority among shareholders who do not hold a controlling interest.
Comverse acquired Ulticom, which provides network software for fixed line and wireless telecommunications services, in 1995 for $20 million, paid in shares of Comverse. In April 2000, during the period of the high-tech bubble, Ulticom raised $55 million on Nasdaq, at a value of $480 million.
The low price in the current deal can be explained by Ulticom's results. In 2009, it recorded sales of $45.8 million, and a bottom line loss of $4.5 million. The first half of 2010 was even less good. Revenue fell by 26.1% in comparison with the corresponding period last year, to $17.3 million.
Besides Ulticom, holding company Comverse Technology owns a 66.5% stake in Verint (VRNT), which develops video and voice recording systems. Two months ago, Converse published a prospectus for the sale of 10% of its holding in Verint, in order to boost its cash balance, but it is now not certain that the sale of shares will go ahead, given the talks being conducted by Goldman Sachs.
Published by Globes [online], Israel business news - www.globes-online.com - on October 13, 2010
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