The key to Mosaid Technologies Inc. shareholders getting a significantly higher white knight bid rests in the hands of executives in Washington State and Finland.
Wi-LAN Inc., which today bumped its hostile bid for Mosaid by 11 per cent to $42 a share, acknowledges that value doesn't take into account the patent portfolio that Microsoft Corp. and Nokia Oyj recently chose Mosaid to manage. That's because the patent portfolio, known as Core Wireless, doesn't necessarily go with Mosaid to a new owner. Nokia and Microsoft have to approve any change.
In fact, if Wi-LAN gets Mosaid and Microsoft and Nokia don't allow the patent portfolio to go along, Wi-LAN and Mosaid would have to pay a $5-million penalty, or about 1 per cent of the overall deal value.
"We don't have enough information to really determine whether it would be good to have or not to have," said Jim Skippen, Wi-LAN's chief executive officer. "We're completely prepared to buy Mosaid at this price, without Core Wireless."
That's the opening for Mosaid to find a higher bid.
For a friendly buyer that can secure the approval of Microsoft and Nokia, there will be no need to pay that $5-million and there's the option value of the patent portfolio. Bankers for Mosaid are pushing to find a white knight that is acceptable to Microsoft and Nokia, enabling whoever that is to pay up to a level that includes a value for the patents.
But it means a very complicated dance done on a very fast timeline, with less than two weeks until Mosaid's shareholder rights plan expires and Wi-LAN can start taking up shares. For that reason, shareholders aren't pricing in much value for the Core Wireless option.
The problem is valuing the patents is a time-consuming and complicated process using a lot of assumptions. It's no surprise that one analyst pegged the additional value to Mosaid from the patent portfolio at $17 a share, while another one put it at $30.50. In other words, who can really say?
For the moment, it appears Mosaid shareholders are treating the patent portfolio and its ability to create value much in the way that Wi-LAN is -- an option that doesn't have much if any value.
Mosaid stock is trading just above the $42 bid level, suggesting shareholders aren't placing high odds of much more coming their way.
If Mosaid truly believes, as it has said, that Core Wireless is a game changer for its shareholders, now's the time to prove it.