TORONTO — As patents continue to ascribe power in the technology world, Wi-LAN Inc. is hoping purchasing Mosaid Technologies Inc. will help to expand its influence.
Offering $480-million in cash to acquire its rival patent licensing firm after markets closed Wednesday, the $38 per-share bid has long been expected by market watchers. The two Ottawa-based companies boast valuable and complementary portfolios of intellectual property related to highly competitive fields such as wireless communications and digital television technologies.
“This is something we have been telling investors to expect for a long time,” said Sameet Kanade, technology analyst with Northern Securities in Toronto. “With the amount of cash that [Wi-LAN] has and with what is going on down south with Google’s acquisition of Motorola, this was the perfect acquisition target.”
Wi-LAN, which became Ottawa’s most valuable public company in January with a current market capitalization of $867-million, had $180-million in cash on hand at the end of its 2010 fiscal year and said it would issue $200-million in debentures to help finance the deal. The company’s offer represents a premium of about 31% on Mosaid’s closing share price Wednesday.
“It is my belief that to succeed in today’s market, bigger is better,” Jim Skippen, Wi-LAN chief executive who spent a decade working as a senior Mosaid executive, said in a release. “Given our familiarity with Mosaid’s business, its employees and our close proximity in the same city, this is a natural strategic fit.”
Wi-Lan has attempted to join forces with Mosaid before, Mr. Skippen said, only to have been rebuffed at every turn. Although Wednesday’s unsolicited bid represents Wi-LAN’s most concerted acquisition effort to date — aside from the 1.6% of Mosaid that Wi-LAN already owns — Mr. Kanade believes nearly half a billion dollars will still likely not be enough.
“At $38 per share, in our opinion, is actually low,” he said. “[The combination] makes absolute rational sense, but the bid just needs a bit more refinement.”
There is some basis to believe Mosaid is more valuable than its balance sheet might suggest. In addition to pushing a major infringement lawsuit against 17 companies including Canadian BlackBerry maker Research In Motion Ltd. — Mr. Kanade believes the suit will be settled in Mosaid’s favour by the fall of 2012 — the company managed to boost its profit by 272% between its 2009 and 2010 fiscal years.
Michael Salter, director of investor relations for Mosaid, said management was still “digesting” the offer and would respond in due course. Mosaid’s board of directors will discuss the offer at their next meeting scheduled for Aug. 24, he said, one day ahead of the company’s next quarterly earnings release.
A unified Wi-LAN and Mosaid would give the combined entity a trove of some 4,200 patents related to wireless, wired and semiconductor technologies, most of them coming from Mosaid’s 3,000-strong portfolio. Licences for those patents are being increasingly and aggressively sought after by major technology companies hoping to avoid costly infringement lawsuits, with Google Inc. offering to buy Motorola Mobility Holdings Inc. for US$12.5-billion on Monday.
While the company behind the world’s largest search engine justified the single largest acquisition in its history as a desire to “supercharge” the ecosystem of its Android mobile software platform, others point to the 83 year-old phone maker’s vast collection of more than 24,000 patents and patent applications as the primary motivating factor for Google’s gamble.
“There has been much more focus on [intellectual property] just over the past 12 or 18 months,” said Mr. Kanade. “So it has been a frenzy to create IP firewalls purely on that basis.”
Source: National Post
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