Airvana snatched up in $530M acquisitionhttp://www.indusbusinessjournal.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=15F4504AA0A24B3A81279CCD754B560CCHELMSFORD, Mass. – Sanjeev Verma’s decade-long successful run with Airvana Inc. is hitting a crescendo as the company is set to be acquired for $530 million in cash.
The deal, with newly formed 72 Mobile Holdings LLC, will take the Nasdaq-traded Airvana private after seven years on the public market. The acquisition is expected to close in the first quarter of this year and has been approved by the company’s board. S.A.C. Private Capital Group LLC, GSO Capital Partners LP, Sankaty Advisors LLC and ZelnickMedia will jointly own 72 Mobile Holdings.
Members of Airvana management, including President and Chief Executive Officer Randy Battat, Chief Technology Officer Vedat Eyuboglu and Vice President Verma, will exchange a portion of their Airvana stock for an equity interest in the new company. The current management will continue with their roles at the company following the closing of the acquisition with the addition of Merle Gilmore, former president of Motorola’s Communications Enterprise, as chairman.
Chelmsford-based Airvana, which was founded in 2000 by Eyuboglu and Verma, develops equipment for mobile operators that allows the delivery of wireless broadband services such as Internet access, e-mail and music downloads. The company’s products are deployed in 70 commercial networks on six continents. It works with such industry heavy hitters as Alcatel-Lucent, Hitachi Communications Technologies Ltd., Motorola Inc., Nokia Siemens Networks, Nortel Networks Inc., Pirelli Broadband Solutions, Qualcomm Inc. and VeriSign Inc.
“As we transition to a private company, Airvana will continue to focus on its two major mobile broadband product lines, EV-DO software and femtocells,” Battat said in a statement. “Our customers should expect the same great products delivered by the same great team.”
“We are enormously excited about the opportunity to work with such a strong management team and talented group of employees to build on Airvana’s impressive track record,” stated Gilmore.
When reached for comment, Airvana said it is not commenting publicly on the deal at this time.
However, the company did release some additional facts when it announced the deal.
“This transaction represents a substantial premium for Airvana shareholders. The transaction will provide the company with additional flexibility to focus on its long-term strategic initiatives,” the company said in a statement to its shareholders. “As providers of cutting-edge 3G technology to many of the world’s leading wireless providers, it is important that we invest in our technologies to continue to provide the services to which our customers have grown accustomed.”
Airvana also stated that it does not expect to change its strategy significantly as a result of this deal, but does expect to immediately focus on “long-term strategic initiatives.”
“From a customer standpoint, nothing will change. Airvana will continue to operate business-as-usual through the close of the transaction and beyond,” the company said. It also pointed out that it intends to honor all ongoing and prior contracts.
The 555-employee company said it had no intentions or reducing headcount, making any major changes in employee compensation at this time and anticipates there will be “no changes in our daily operations.” Headquarters will remain in Chelmsford.
About the deal, Airvana concluded: “This is an important milestone for Airvana that opens an exciting new chapter in our corporate history and we are excited about our future prospects.”
Stock in the company, which went public in July 2007, rose to a close to 52-week high of $7.59 per share in the period after the deal was announced and immediately jumped from $6.20 to $7.57 the day after the announcement. The stock has dropped as low as $4.34 in the last year.
Though the company reported strong cash on hand toward the end of 2009, the last year saw a period of significantly decreased business. For its most recently reported results, Airvana reported total revenue for the third quarter of 2009 was $2.7 million, compared with $8.2 million for the third quarter of 2008. For the first nine months of 2009, total revenue was $16.9 million compared with $74.9 million for the first nine months of 2008. Net loss for the first nine months of 2009 took a massive jump to $38.1 million, compared to a net loss of only $3.6 million during the same period in 2008.
At least some investors in Airvana, however, are not happy about the deal and have filed a lawsuit over alleged breach of fiduciary duty by the board of the directors.
According to the complaint, filed by the Shareholder Foundation Inc. in Delaware Chancery Court on behalf of current investors in Airvana, the plaintiff alleges that the board of directors of Airvana failed to ensure that the shareholders will receive maximum value for their shares and that the board of directors failed to conduct an appropriate sale process. The plaintiff alleges that the proposed transaction is one-sided because it contains a “no solicitation” provision, a $15 million termination fee provision, will only benefit the insiders, but not the Airvana shareholders, and the true value of Airvana's stock is much greater than the consideration offered in the proposed transaction. The plaintiff claims the offer should be higher because the company introduced recently new updated products and the financial results are promising, including outstanding invoices of about $36.4 million and a recent payment of $39.6 million payment from Nortel.
Before co-founding Airvana in 2000, Verma spent 10 years at Motorola.
He is originally from New Delhi and received his bachelor's degree in engineering from the Delhi College of Engineering. In 1985, he came to the United States to get a master's degree in engineering from the University of Rhode Island. He received a master’s degree in business administration from the Massachusetts Institute of Technology, which is where he met Airvana co-founder Eyuboglu.