The management buy-out of the VSAT division of satellite and telecommunications radio frequency products developer Mitec Telecom is finally set to take place after the parent company announced that its is to merge with Israeli fibre optics specialist…
The management buy-out of the VSAT division of satellite and telecommunications radio frequency products developer Mitec Telecom is finally set to take place after the parent company announced that its is to merge with Israeli fibre optics specialist Optiway.
In what is essentially a reverse takeover, Mitec will pay Optiway between C$3.5m to C$5m in cash with the Canadian company’s shareholders subsequently owning 30% to 40% of the combined company depending on the final cash consideration. As part of the deal, privately-held Optiway will then take Mitec’s listing on the Toronto Stock Exchange.
Prior to the completion of the merger, which remains subject to both shareholder and regulatory approval, Mitec stated that it will at last complete the previously announced sale of its VSAT division to a group of Mitec senior employees.
Mitec initially received a binding Letter of Intent to acquire the VSAT division for C$3.4m in late October 2011. It then revealed in mid-November that it expected the sale to be completed on 15 December 2011. However, there were two major hurdles to get past before the transaction could be completed.
Firstly, Mitec would be obligated to redeem its C$2.5m of convertible debentures if the sale took place. The debentures were scheduled for repayment on 19 October 2011 but the company had successfully negotiated a year-long extension at the cost of an increase in their interest from 12% to 15% and a reduction in the conversion price from C$.06 per share to C$.03 per share.
Secondly, Mitec anticipated that by selling these assets, the company would likely breach Toronto Stock Exchange listing rules and be forced to delist.
As such, it has waited until it secured the agreement with Optiway to give it the necessary financial clout to repay the debentures and overall valuation to see it remain on the TSX.
Founded in 2004, Optiway offers advanced optical fibre solutions that enable wireless communication to take place within In-Building Wireless (IBW) environments. Over the past year, the company has sought to rapidly expand internationally particularly in South America and Eastern Europe and had stated that its strategy for 2012 was to target the North American market.
Commenting on the planned merger, Jeffrey Mandel, president and CEO of Mitec said: “Mitec is looking for proprietary growth opportunities in order to exploit its infrastructure and background knowledge in wireless technology. Optiway has developed a game changing wireless technology in an area which will appeal to telecom operators worldwide. I am delighted that Mitec has identified a transformational, impact deal that fits both companies’ objectives. The ability to provide Optiway with a cash infusion and public company exposure is very compelling to them.”
