DREP: InterDigital suitors in holding pattern, sources say



26-Oct-11
13:43 	InterDigital suitors in holding pattern, sources say
Story

Possible suitors for InterDigital (NASDAQ:IDCC) are either waiting for a lower valuation or are unwilling to part with the cash needed to complete a deal, said sources following the situation.

Domestic suitors of InterDigital say that the market capitalization of the company needs to fall more for acquirers to be interested, said the first source familiar with the process.

Asian interest has dropped off because some buyers are not seeking to complete a large transaction, noted a person familiar with the matter, a second source familiar and an industry banker. An InterDigital spokesperson did not return a request for comment.

Today, 26 October, InterDigital will report 3Q11 results but announced earlier this week that it will suspend its conference call due to its continuing strategic review. On 19 July, InterDigital announced it hired Evercore and Barclays to review strategic alternatives for the King of Prussia, Pennsylvania-based IP company.

The first source said the valuation of the whole company will likely have to drop below USD 2bn before the a deal becomes reasonable for domestic suitors. This source added it was his impression that the process has quieted down as suitors wait for a “pull back” in price.

This news service reported earlier this month that larger US technology companies may be more open to playing a minority role in a transaction if the price was right.

InterDigital’s shares are trading around USD 47.85, with a market capitalization of USD 2.2bn. InterDigital finished the 30 June quarter with net cash of USD 512m.

The person, who was familiar with Samsung (SEO:005930), said the Korean company has been following the process with interest to evaluate whether a transaction could have a competitive impact on the industry but the company is not working to take “any action” on the asset.

Likewise, the second source, who was familiar with HTC (TPE:2498), said that the Taiwan company’s interest in InterDigital at this point in time is low. This source noted that recent deals, including Nortel, have been at near-inflated valuations and HTC does not hope to participate in a deal at such valuations.

HTC has never paid USD 2bn for a patent pool, the source said, adding that "not too long ago [HTC was] just a small company."

The industry banker following the process said the excitement surrounding companies’ need to own IP assets has come down. InterDigital was not able to get a bidding war going for its assets and buyers do not feel compelled to rush into a transaction, he said.

For 2010, InterDigital had total revenue of USD 394.5m, with patent license royalties equaling USD 370m of the total. At the current valuation, the company is selling for about 4x enterprise value to 2010 sales.

by Louise Bleakley in San Francisco, Perris Lee in Taiwan, Tim Leemaster in Hong Kong, Yu Kyeong Kim in Seoul and Ed Mullane in New York


Source 	dealReporter

Target 	InterDigital (IDCC) 	DS   Int.
Bidder 	Samsung Electronics Co., Ltd (005930) 	DS   Int.
Bidder 	HTC Corporation. (2498) 	DS   Int.

Intel. Grade 	Strong evidence
Countries 	China
South Korea
USA
Sectors 	Computer software
Services (other)
Intel. ID 	1254165