Plaintree seeks UBS in all-stock deal
Copyright 2002 Toronto Star Newspapers, Ltd.
Wireless equipment maker Plaintree Systems Inc. wants to acquire Unique Broadband Systems Inc. in an all-stock deal that would combine two money-losing companies and their respective technologies.
But the likelihood of an agreement depends on whether Plaintree can get its own nominees elected to Unique Broadband's board of directors at the company's annual meeting next Monday.
"Plaintree believes that the companies are complementary and that an arrangement between Plaintree and UBS would be beneficial to both companies," David Watson, chief executive officer of Ottawa-based Plaintree, said in a statement.
Watson, who met Wednesday with UBS's board of directors to negotiate an arrangement, said Plaintree intends to offer 1.3 common shares for each common share of Concord, Ont.-based UBS, valuing the planned merger at roughly $35.4 million. The offer would value UBS stock at 34.5 cents a share, 9.5 cents less than yesterday's closing price.
It would also include a dividend for UBS shareholders, who would get 15 cents a share if they supported the deal. The dividend, a payout totaling $15.4 million, would be taken from UBS's $45 million cash reserve.
In a separate statement, UBS chairman Patrick Lavelle said Plaintree's proposal — while "interesting" — is at a preliminary stage and best left for UBS's new board after it is voted in next week.
During an investor conference call yesterday morning, Watson said the merger would help Plaintree secure a leadership position in an emerging wireless market called "free space optics," which uses infrared beams as an alternative to high-speed cable or fibre-optic systems.
UBS makes wireless-network equipment based on technology called orthogonal frequency division multiplexing, or OFDM. Since fog and snowfall can interfere with infrared beams, Watson said Plaintree would integrate UBS's technology into a single product that could use radio-frequency signals as a backup to infrared.
Watson said a number of major network providers are testing Plaintree's technology at 40 sites around the world. He said within two years, the sites could generate between $20 million and $40 million for the company.
During the conference call, one UBS investor called Plaintree's offer a cash-grab from a company that itself is running short on funds.
Plaintree's third-quarter results reveal less than $1 million in cash on hand and losses quintupling the company's $223,000 in revenues for the period.
"This is an attempt for you to get hold of the $45 million that UBS has. … You're out of money and you think you can change everything for UBS? I don't buy that," said the shareholder, before being cut off the call.
The Ontario Securities Commission on Tuesday accused the company's founder and ousted CEO, Alex Dolgonos, and other former UBS executives of failing to disclose their stakes in the company. It is investigating Dolgonos for possible securities violations.