MDSI Mobile Data Solutions Inc. agreed yesterday to be sold to a U.S. communications services firm for $86-million (U.S.) in cash and stock, concluding months of speculation about the future of the Richmond, B.C., software company.
The deal ends MDSI's troubled history as a public company. In the 1990s, the company was a stock market darling, but a downturn in its core telecom, utility and cable markets and choppy revenue sent its share price tumbling.
In recent years, MDSI has struggled to build a reliable revenue and earnings model to win back the favour of the investment community, said Glen Tracey of Vancouver's Pacific International Securities.
"It's not so much MDSI wants to sell the company as much as they want to maximize shareholder value," he said.
Under the terms of the deal with At Road Inc. of Fremont, Calif., MDSI shareholders will receive 0.75 of an At Road share or $9 (U.S.) in cash for each MDSI share they own. The maximum amount of cash to be offered by At Road is capped at $19.5-million.
The news sent MDSI shares soaring 53 per cent to $8.62, up $3.01 on the Nasdaq Stock Market, the stock's highest close in more than three years.
On the Toronto Stock Exchange, shares rose $3.66 (Canadian) to $11.41.
On conference call with analysts, Krish Panu, president and chief executive officer of At Road, said the two companies "fit together hand in glove." At Road provides services to the mobile work force sector while MDSI makes software used in the field by employees in the utility, telecommunications and cable sectors.
The agreement follows a six-month search for an MDSI buyer. In September, the company hired Bear Stearns & Co. Inc. to evaluate various options, including a potential sale. On Monday, the company said it was in merger talks but added that no deal had been reached.
Analysts recommend investors tender their shares. The At Road offer represents a significant premium to MDSI's $3 to $6 trading range on the Nasdaq over the past 12 months.
"It's a healthy valuation," said Michael Abramsky of Canaccord Capital Corp. He described MDSI as a "quality business with good technology growing at 20 to 25 per cent a year."
Blair Abernethy, analyst at Paradigm Capital Inc., forecasts flat near-term revenue growth at MDSI, citing the end of two major contracts and soft demand in the company's core markets.
"The best course for MDSI is to merge operations," he said in a research note yesterday.
Founded in 1993, MDSI pioneered the development of wireless work force management software, tools that allow mobile workers to communicate with head office. Revenue peaked at $58-million in 1999 and shares touched a record intraday high of $90 the following year.
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