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Mosaid lines up white knight to block Wi-LAN takeover Add to ...

Canadian patent enforcement company Mosaid Technologies Inc. says it has lined up a private equity firm interested in topping a hostile takeover bid from Wi-LAN Inc. , and regulators have given the company three more weeks to get a deal done.

Wi-LAN made a hostile offer of $38 a share, or about $480-million, for Mosaid in August. Now Mosaid says it has a party interested in making an offer at a “price that is meaningfully superior” to that.

The companies, both of which make money by licensing patents to technology companies, have had merger talks in the past but nothing had ever come of it. Since Wi-LAN went hostile, the companies have been locked in a nasty fight.

On Wednesday, Ottawa-based Wi-LAN was in front of the Ontario Securities Commission seeking to have Mosaid’s shareholder rights plan thrown out as soon as Oct. 24 so Wi-LAN could proceed with its offer. That’s when a banker working for Ottawa-based Mosaid revealed the interest from the unnamed private equity firm, which drove Mosaid’s shares almost 5 per cent higher.

“The potential bidder is a substantial private equity firm with an international presence, over $5-billion of capital under management and noted previous success investing in Canadian public companies in competitive situations,” GMP Securities banker Neil Selfe said in his affidavit.

However, the hopes for a higher offer come with a big caveat. The potential bidder would need four to six weeks to do its due diligence and complete everything necessary to finalize an offer, according to the affidavit from Mr. Selfe.

The bidder will have to hurry. The OSC ruled that the shareholder rights plan that protects Mosaid from the Wi-LAN bid will no longer exist come Nov. 1, just under three weeks from now. A spokesman for Mosaid declined to comment on whether that will be enough time.

Mosaid had sought until Nov. 11 to organize a transaction to rival the Wi-LAN takeover offer. Wi-LAN argued that Mosaid has had plenty of time and the rights plan should be struck down on Oct. 24. A spokeswoman for Wi-LAN declined to comment on the potential bid.

The key issue for regulators looking at the Mosaid situation was when to start the clock on the rights plan. Canadian market watchdogs rarely let a shareholder rights plan (often called a poison pill) block a takeover for more than 60 days.

Wi-LAN formally launched its bid on Aug. 23. However, Mosaid’s position is that the company didn’t really start looking for a higher bid until a few weeks later because Mosaid was focused on closing a big deal that would see it manage a portfolio of patents for Microsoft Corp. and Nokia Corp.

Mosaid said in its submission to the OSC that it had to delay the search for another bid because the Wi-LAN bid put the Microsoft-Nokia patent deal in jeopardy. One of the companies got skittish and delayed closing for a week, so Mosaid had to put out that fire first.

Then the special committee of Mosaid’s board that was handling the Wi-LAN situation chose to use a few more days to try to convince investors of the merits of the patent deal before launching an auction.

There was a hope that the patent transaction would drive Mosaid shares much higher, perhaps putting the company out of reach of Wi-LAN. If that happened, then Mosaid would not need to try to sell itself to a higher bidder. But that didn’t happen. Mosaid shares traded only slightly above the Wi-LAN bid price.

“This was a surprise to the special committee,” Mosaid said in its submission.

Editor's Note: Wi-LAN Inc.’s headquarters is in Ottawa. Incorrect information was published in an earlier version of this blog post. This version has been corrected.

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