Sources inform "Globes" that Polar Investments is negotiating to buy ADC Telecommunications' (Nadaq:ADCT) 21.9% stake in Mind CTI (Nasdaq: MNDO) for $1.60-1.80 a share. The total price would be $7-8 million.
Polar Investments bought 4.8% of Mind CTI on Wall Street last year for $2 million. If the current deal goes through, Polar Investments will become Mind CTI's biggest shareholder, with 26.7%.
The $32-36 million price for Mind CTI in the current deal reflects a 30-45% premium over the company's market price of $25 million, based on $1.25 a share. However, it is less than Mind CTI's cash reserves of $2 per share. In other words, Polar Investments will probably buy the stake through its technology investment arm, Koonras Technologies, in effect getting Mind CTI's business activity for free.
Although Mind CTI, which provides billing solutions for IP and wireless networks, has been hurt by the current telecom market climate, its situation has stabilized in recent quarters after business contracted earlier. The company lost $630,000 ($0.03 a share) on revenue of $2.4 million in the first quarter of 2002, compared with a loss of $1.5 million ($0.07 a share) on the same revenue in the fourth quarter of 2001.
There were few buyers for ADC's stake in the company. ADC acquired the share when bought Teledata, which had invested $4-5 million in Mind CTI at a company value of $15-20 million five years ago. It was looking for a buyer of the stake for several months, but advanced negotiations were conducted only Polar Investments.
Polar Investments, under its previous name Poalim Investments, was the largest shareholder in Teledata and conducted the negotiations to sell it to ADC.
Why does ADC want to sell its Mind CTI stake at almost any price? There appear to be two main reasons. First, the stake is simply too small for ADC. Although the investment was originally strategic, the fall in Mind CTI's business in the past two years has reduced to a value that is of no interest to ADC, which has sales of $1.5 billion a year and a market value of $1.9 billion.
Secondly, three years ago, ADC acquired US billing company Saville Systems , which has over $100 million in sales a year. While the original intention may have been for Mind CTI and Saville to cooperate, in practice they were rivals.
Published by Globes [online] - www.globes.co.il - on June 20, 2002