Wi-LAN boosts takeover offer for rival patent house Mosaid by 11 per cent

OTTAWA – Wi-LAN Inc. (TSX:WIN) boosted its hostile takeover bid for rival Canadian patent house Mosaid (TSX:MSD) by 11 per cent on Wednesday and declared the revised offer of $531-million in cash is as high as it will go.

Wi-LAN chief executive Jim Skippen said he will walk away from the takeover bid, which was up from an earlier offer of $480 million, if shareholders don’t tender their stock by a Nov. 1 deadline.

He said the company would look for other deals to make.

“If shareholders don’t want to tender to this offer, which we think is pretty generous, fair enough, we’ll move on to other opportunities,” he said.

“Right now we’re focused on Mosaid, but there are lots of opportunities out there that we’re working on all the time.”

The offer of $42 per share represents a premium of 38.6 per cent to the value of Mosaid shares before Wi-LAN’s first overture of $38 per share in August.

The increase, Skippen said, came after Wi-LAN took a second look at Mosaid and spoke to some of its shareholders.

“We looked again at the business and decided $42 is still an offer that makes sense for us,” he said.

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Skippen said his company has spoken with a “significant number” of Mosaid shareholders and he has a “high degree of comfort” that they will tender to the offer.

However Mosaid shares closed up $1.41 at $42.27 in trading on the Toronto Stock Exchange after the announcement Wednesday, suggesting that at least some investors believe a higher bid may be possible.

The company has repeatedly rebuffed Wi-LAN’s offers so far, as it works to find a richer alternative. It has said that an unidentified private equity firm is considering a takeover offer of its own that could be “meaningfully superior” to the earlier Wi-LAN bid.

Mosaid again urged shareholders Wednesday to hold on to their shares, but said it would have a recommendation before the Nov. 1 deadline.

“Mosaid’s special committee is discussing potential value-enhancing alternatives with third parties and will review, consider and evaluate Wi-LAN’s bid in that context,” said Carl Schlachte, chairman of the board and special committee.

Companies like Mosaid and Wi-LAN generate revenue by licensing technology rights to large telecom and computer chip makers, which have recently demonstrated a willingness to pay millions or even billions of dollars for patents.

Skippen noted that Mosaid makes sense as an acquisition as both companies are based in Ottawa and could find synergies if they combined.

“We’re not going to find exactly the same type of opportunity, but there are opportunities. There are companies out there, there are patent portfolios out there, all of which could be of interest to us,” he said if the Mosaid offer fails.

The bid is set to expire the same day a Mosaid shareholder rights plan is set to end under a ruling by the Ontario Securities Commission.

A shareholder rights plan usually makes it prohibitively more expensive for an unwanted bidder to succeed in a hostile takeover because it floods the market with new shares or imposes other conditions.

Last month, Mosaid announced a deal to acquire 2,000 patents and patent applications originally filed by mobile phone giant Nokia.

Under the agreement, Mosaid is buying Luxembourg-based Core Wireless Licensing, which has a portfolio of Nokia patents. Mosaid will pay for the acquisition through royalties from future licensing and enforcement revenues.

However, if Wi-LAN is successful in its takeover bid, it will not automatically gain control of the patents. A transfer would require approval by Nokia and its partner Microsoft which holds a license for the patents.

Wi-LAN shares closed down five cents at $6.11 on the Toronto Stock Exchange.