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By Alastair Sharp and Pav Jordan
TORONTO |
Thu Aug 18, 2011 11:48am EDT
TORONTO (Reuters) - A proposed combination of two Canadian patent licensing companies will make it easier to extract lucrative licensing deals from technology giants, would-be buyer WiLan said on Thursday.
WiLan, which makes money by developing and licensing intellectual property for the communications and consumer electronics markets, has offered C$38 a share for smaller rival Mosaid just as tech majors pay heavily for patents to use as weapons in litigation and cross-licensing.
"We strongly believe the combined company will be well positioned to drive future growth on a truly global scale, and drive long-term consistent gains and increase shareholder value," Chief Executive Jim Skippen told analysts on a conference call.
The offer values Mosaid, which says all companies that use Wi-Fi technology require a license from it, at C$480 million, a 20 percent premium to the Wednesday closing price.
Mosaid called on shareholders to take no immediate action on the unsolicited offer.
Skippen said he had spoken with Mosaid's chairman this week about the offer but Mosaid had declined to speak to WiLan's investment bankers. "The door is very much open and the ball is very much in their court," he said.
Shares in Mosaid jumped 24.4 percent to C$39.37 by midday, suggesting investors consider a higher bid or competing offer a possibility. WiLan shares were down 4.65 percent at C$6.76.
SKYROCKETING VALUATIONS
The perceived value of patents has skyrocketed in recent months. Apple, Microsoft, Research In Motion paid $4.5 billion to thwart Google's attempt to snare thousands of bankrupt Nortel's patents.
Google, needing to beef up its patent portfolio to protect its Android mobile phone software from legal attack, said on Monday it would pay $12.5 billion for Motorola Mobility, to gain access to one of the mobile phone industry's largest patent libraries.
Two-thirds of Mosaid's revenue stems from licenses relating to semiconductors and memory, while it has a growing wireless licensing business focused on the short-distance WiFi technology.
WiLan has settled a string of legal battles this year with companies it says were using its patented technology without paying licensing fees, including Intel, Cisco Systems and Texas Instruments.
The terms of such deals are typically confidential, making it harder to value Mosaid's worth difficult, BMO Capital Markets analyst Brian Piccioni said in a note to clients.
"The reality is that most patents are worthless, some are worth a fair bit, and a small number are worth a great deal," he said. He raised his price target on Mosaid to C$40 from C$32.
He also said the cost and hassle of valuing the portfolio might discourage others from launching a rival bid.
Both WiLan and Mosaid develop and acquire patents with the main aim of winning licensing deals from companies that use the technology, rather than using the intellectual property in their own products.
(Editing by Janet Guttsman)
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