The Board of Directors of Tandberg Television ASA said Wednesday that the digital television systems vendor is now recommending the voluntary offer made by Ericsson to acquire all outstanding shares in the company. The offer was launched February 26 2007, competing with an offer by Arris, recommended by the Tandberg board on January 15.
To acquire all outstanding shares, Ericsson has extended its offer to include US citizen and US resident holders of Tandberg shares.
“[We] note that Ericsson’s unsolicited offer is competitive to the voluntary offer launched by Arris Group, Inc. (“Arris”) on 15 February 2007″, Tandberg Television’s board of directors said in a statement.
Adding “It is the Directors’ opinion that Ericsson’s offer represents a compelling opportunity for the shareholders of Tandberg Television and a superior offer compared to the offer from Arris. The Directors unanimously recommend the shareholders of Tandberg Television accept Ericsson’s offer”.
Tandberg Television says it has notified Arris that it has withdrawn its recommendation that Tandberg Television shareholders accept the offer from Arris and terminated the Transaction Agreement with Arris. As a result, Tandberg Television is obliged to pay a termination fee to Arris of $18 million within one business day after the change of recommendation. Ericsson has, with certain exceptions, agreed to refund the $18 million to Tandberg Television if Ericsson does not complete its offer.
Ericsson could have blocked the Arris offer by withholding its shares, as it was conditional on acquiring 90% or more of Tandberg shares. Ericsson has acquired an 11.7% stake in Tandberg Television from certain institutional shareholders, and in addition secured pre-acceptances from 15.7% of Tandberg Television’s shareholders.
The Ericsson offer consists of NKr106 in cash for each Tandberg Television share. This price represents a premium of approximately 10% over the Arris offer price of NKr96 for each Tandberg Television share, which consists of at least NKr80 in cash and up to NKr16 in new shares of Arris common stock.
The board seems to appreciate that “Ericsson’s offer does not subject Tandberg Television shareholders to the risks or potential benefits of changes in Arris’ share price after completion of the transaction”.
Ericsson’s offer price of NKr106 reflects a 63% premium over the average closing price for Tandberg Television’s shares during the 90 trading days preceding 15 January 2007 (the announcement date of Arris’ offer), a 48% premium over the average closing price for Tandberg Television’s shares during the 60 trading days preceding 15 January 2007 and a 39% premium over the average closing price for Tandberg Television’s shares during the 30 trading days preceding 15 January 2007.
However, the average closing price of Tandberg Television’s shares from 26 February 2007 through 6 March 2007, following the Ericsson offer, has been NKr109.71, equal to 3.5% above the offer price from Ericsson.
The closing share price of Tandberg Television as of 6 March 2007 was NKr110.00 per share. To the extent that the Tandberg Television share price remains at a premium to Ericsson’s offer price, it could be possible to sell shares in the market at a price which is higher than the price that is offered by Ericsson.
Prior to entering into the Transaction Agreement with Arris, the management and the Directors evaluated various strategic alternatives for Tandberg Television and as part of that process conducted discussions with Arris and other potentially interested parties. A number of parties conducted due diligence, culminating in the receipt of competitive offers, of which Arris’ offer delivered the highest value to Tandberg Television’s shareholders at that time.
As part of Tandberg Television’s discussions with potentially interested parties, Deutsche Bank AG made an approach to Ericsson in the fall of 2006 with respect to Tandberg Television. Ericsson did not enter into a non-disclosure agreement with Tandberg Television or receive any non-public information from Tandberg Television. There was no contact between Tandberg Television and Ericsson from that point until 25 February 2007 when Ericsson management separately contacted Tandberg Television’s Chairman and Chief Executive Officer to inform them that Ericsson would publicly announce its voluntary offer the following morning.