Wi-LAN Inc. has announced that it intends to make a formal all-cash offer to acquire all the outstanding common shares of MOSAID Technologies Incorporated for approximately C$480 million. Under the terms of the Offer, WiLAN proposes to acquire all of the outstanding common shares of MOSAID (the “MOSAID Shares”) for 100% cash consideration of C$38.00 in cash per MOSAID Share.
Excluding MOSAID’s cash from its balance sheet on a dollar-for-dollar basis from the MOSAID share price, the Offer represents a premium of approximately 31.1% over the closing price of the MOSAID Shares and a premium of approximately 38.2% over the volume-weighted average trading price of the MOSAID Shares on the TSX for the 10 trading days ending on August 16, 2011. Based on the closing price of the MOSAID Shares on the TSX on August 16, 2011, the implied premiums are 21.0% and 25.3%, respectively.
In conjunction with its intention to make a formal offer for the MOSAID Shares, WiLAN is pleased to announce that it has entered into an agreement to sell on a bought deal basis, to a syndicate of underwriters led by Canaccord Genuity Corp. and CIBC World Markets Inc., C$200,000,000 aggregate principal amount of extendible convertible unsecured subordinated debentures (the “Debentures”), to partially finance the Offer. At this time, WiLAN expects that certain of its management will participate in the Debenture offering. The Company has also granted the underwriters an option, exercisable in whole or in part at any time up to 30 days following closing of the Debenture offering, to purchase up to an additional C$30 million aggregate principal amount of Debentures on the same terms.
The initial maturity date of the Debentures will be January 31, 2012, which will be extended to September 30, 2016 upon the initial take-up of MOSAID Shares by the Company pursuant to the Offer. The initial maturity date may be extended to March 31, 2012 at the Company’s discretion. The Debentures will have an interest rate of 6.00% per annum payable semi-annually in arrears on September 30 and March 31 in each year, with the first coupon paid on the third business day following the initial take-up of MOSAID Shares. Each C$1,000 principal amount of Debentures will be convertible into approximately 108.6957 common shares of the Company at any time following the initial take-up of the MOSAID Shares, at the option of the holder, representing a conversion price of C$9.20 per common share.
On or before August 23, 2011, the Company will file with the securities commissions or other similar regulatory authorities in each of the provinces of Canada (other than Quebec), a preliminary prospectus relating to the issuance of the Debentures. Closing of the Debenture offering is expected to occur on or about September 8, 2011, subject to TSX and other necessary regulatory approvals.
The securities being offered have not been and will not be registered under the U.S. Securities Act of 1933 and state securities laws. Accordingly, the securities may not be offered or sold to U.S. persons except pursuant to applicable exemptions from registration requirements.
Net proceeds from the Debenture offering will be used to partially fund the proposed all-cash acquisition of MOSAID and for general corporate purposes, including but not limited to transaction expenses. The remainder of the Offer will be financed with existing cash on hand and through a C$110 million non-revolving bridge term facility from CIBC. WiLAN intends to repay the non-revolving bridge term facility through cash on hand immediately after completion of the acquisition of MOSAID.
The MOSAID OFFER
Benefits of the Offer include:
- Creation of a Stronger, More Valuable Global Licensing Company - The creation of a strong, licensing champion with the global scope, scale and expertise to compete more effectively in more global technology markets;
- Aggregate Portfolio Value – Combining the patent portfolios will provide a more efficient and rapid path to establishing a larger and more valuable aggregate portfolio given the combined management team’s expertise and increased business scale;
- Technology, Business and Geographic Diversification – The resulting expanded product, market and geographic coverage provides technology, business and geographic diversification, significantly de-risking the combined entity and presenting greater licensing opportunities. The combined patent portfolio of more than 4,200 patents will apply to the wireless, wireline, consumer electronics and semiconductor technologies;
- Greater Financial Strength - 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;
- Stronger Combined Team - Combining WiLAN and MOSAID will yield a stronger team with the technical, licensing and litigation capabilities necessary to manage and grow a global licensing business. With similar cultures and both teams located in Ottawa, Ontario, the integration risk is believed to be low;
- Synergies – WiLAN anticipates retaining the vast majority of MOSAID staff but nonetheless believes there is potential for cost synergies from combining two public company infrastructures into one, as well as leveraging best practices. These synergies are expected to total C$5 million to C$10 million per annum; and
- Accretive – The transaction is expected to be accretive to WiLAN’s adjusted earnings per share and cash flow per share in fiscal 2012.
In addition, upon the successful acquisition of 100% of the outstanding MOSAID Shares, WiLAN intends to revisit its dividend policy, with a view to increasing its existing quarterly dividend from its current level of C$0.025 per WiLAN Share. The amount of the increase will be considered by WiLAN’s Board of Directors upon its review of the Company’s Third Quarter fiscal 2011 financial results in November 2011. Read the rest of this entry »