We had previously pointed out a transaction that looked to be taking place in UTStarcom Holdings Corp (NMS:UTSI) wherein a group of investors were selling a large chunk of shares at a substantial premium to an activist investor. According to the company’s 13D/A filing this morning, the buyer and UTSI’s existing shareholders amended the terms of the transaction:
“On December 4, 2015, the Shah Parties and the Lu Parties entered into an Amendment to the Purchase and Sale Agreement (the “Amendment”) with Smart Soho and Phicomm Technology (Hong Kong) Co., Limited setting out certain terms including the amendments to certain terms of the Agreement and waivers of certain closing conditions set forth in the Agreement. Pursuant to the Agreement (as amended by the Amendment), the closing of the payment of 42.59% of the aggregate consideration took place on December 4, 2015, the closing of the payment of 49.08% of the aggregate consideration shall take place as soon as practicable as agreed among the parties, but in no event later than December 16, 2015, and the closing of payment of 8.33% of the aggregate consideration shall take place as soon as practicable as agreed among the parties after the foregoing payments, but in no event later than January 8, 2016.”
UTStarcom Holdings Shares to be Acquired in Tranches
So far, the buyer, Smart Soho and Phicomm Technology (Hong Kong) Co., Limited, has already paid 42.59% of the total payment of $70.4 million to the seller as of December 4, 2015, and it plans to pay an additional 49.08% of the total payment no later than December 16, 2015, with the remainder following no later than January 8, 2016.
The original payment plan was that the buyer would pay 91.67% of the total amount to the seller no later than December 4, 2015, and the remaining no later than January 8, 2016.
In our opinion, although part of the first tranche of the payment was delayed, it is still good news regarding the consummation of this transaction. The 42.59% of the payment that already took place shows that the buyer is willing to complete this transaction. Under the purpose of transaction section in the previous 13D filing, it stated that:
“The Agreement also contains conditions which, if satisfied, would enable Smart Soho to designate a majority of the Board of Directors of the Company.”
The reasons why the buyer is willing to purchase the stock at such a high premium might be that it wants to conduct some restructuring of the company.