Tag: take-private

MathStar saga gets ‘curiouser and curiouser’

Brenon Daly

-Contact Brenon Daly

As the tender offer for MathStar runs into its final hours ahead of this evening’s expiration, there’s a new twist in the already-twisted saga around this Pink Sheets-listed company. First, a bit of a recap. In early June, hedge fund Tiberius Capital tossed out an unsolicited bid of $1.15 for each share of MathStar, which has been exploring ‘strategic alternatives’ for more than a year. MathStar’s board rejected the initial overture, as it did when Tiberius sweetened the offer earlier this month to $1.25 per share, for a total of $11.5m. When it bumped the bid, Tiberius also said the tender offer expires late tonight. (Of course, it could extend the deadline, as often happens in these cases.)

At this point, however, the deal gets ‘curiouser and curiouser’ (as Alice said when she found herself in Wonderland). We noted late last week that rather than be a seller, MathStar is now planning to be a buyer. The erstwhile fabless semiconductor firm announced that it plans to acquire language-translation vendor Sajan. As expected, the news didn’t go over well with Tiberius, which is also MathStar’s largest shareholder. But the planned purchase also didn’t sit well with the company’s founder and longtime chief executive, Douglas Pihl, who quit in protest.

Given such a vote of no confidence, we looked more closely into MathStar’s proposed buy of Sajan. Although investment bank Craig-Hallum Capital Group is listed as the adviser for MathStar on the deal, we discovered that the transaction actually flows through a different Minneapolis-based investment bank, Feltl and Company.

Not disclosed anywhere publicly is the fact that Feltl has actually worked on deals for both sides of the proposed acquisition, serving as manager for two MathStar offerings over the past three years, and having done placements for the firm before that. Feltl also advised on a placement for Sajan in January 2007. We’re not suggesting anything nefarious about the proposed MathStar-Sajan transaction. But we sought to clarify how it came to be that a vendor with a decade of business in the semiconductor industry came up with the idea – along with Feltl as well as its lawyers and bankers – to use half of its cash holdings to buy its way into a completely different field. No one returned calls.

MathStar’s moves just don’t add up

Brenon Daly

Contact: Brenon Daly

After about a decade in business as a fables semiconductor vendor, MathStar hasn’t been doing much of anything for the past year. We mean that literally. The Pink Sheets-listed company has no ongoing business, no products and, as of Wednesday, no chief executive. However, MathStar nonetheless finds itself the target of several buyout offers. And now, in a fittingly bizarre development, the unwilling seller has turned into a would-be buyer. In a rather curious move, MathStar announced a nonbinding offer Wednesday for a language-translation company called Sajan. (Minneapolis-based investment bank Craig-Hallum Capital Group is advising MathStar on the proposed transaction.)

Even in the murky world of Pink Sheets-listed firms, MathStar’s move stands out as opaque. CEO Douglas Pihl, who also founded the vendor, apparently thought as much. As MathStar announced its play for Sajan, Pihl blasted the proposed acquisition – and then backed that up by resigning his position. Pihl noted in his resignation letter that the planned deal would result in about 50% dilution of existing MathStar shareholders.

The proposed purchase of Sajan also didn’t sit too well with the firm’s largest shareholder, Tiberius Capital, which has been trying to buy MathStar outright for the past month. The Chicago-based fund is currently offering $1.25 for each share of MathStar, or about $11.5m in total. MathStar’s board has repeatedly rejected the bids from Tiberius, just as it shot down the overtures from privately held PureChoice late last year. MathStar announced in May that it would explore strategic alternatives.

Tiberius claims MathStar disclosed the Sajan purchase to create a ‘cloud of hope’ that it could smartly obtain an operating business that would create more value than the proposed sale to Tiberius. (On the other hand, a more cynical assessment of MathStar’s planned transaction would call it a ‘scorched earth’ defense, since the deal would burn up half of the company’s cash.) Whatever the case, the clock is ticking on Tiberius’ bid, which is essentially the only thing that is propping up the penny stock. Tiberius says its tender offer for MathStar expires next Monday.