Sandvine finally set to be sold
Service provider takeover target for years
Early ne x t month, the shareholders of Sandvine Corp. will consider a $ 4.40- a- share offer from PNI Canada Acquireco Corp., an affiliate of U. S. based Procera Networks, Inc. and Francisco Partners.
The purchasers emerged after Sandvine agreed to an earlier deal from U. S.- based Vector Capital, who agreed to purchase the company for $ 3.80 a share. During a six- week “shop period,” PNI Canada and Vector traded competing offers with the process ending when Vector chose not to match PNI’s $4.40 a share offer.
Based on i nformation contained in the meeting circular, Sandvine has been a takeover target for more than four years. All of its would- be suitors were, like Vector and PNI Canada, private equity firms.
If there is any consolation to Sandvine’s shareholders, it’s the price they’re being offered is the highest that other potential acquirers had talked about offering.
But for day one shareholders — Sandvine went public in the fall of 2006 at $1.90 a share — the journey has not been particularly rewarding: The shares peaked at $ 7.10 about one year after it went public, but hit a low of $0.61 at the end of 2008. In its time as a public company, the shares have averaged $ 2.50. It started paying a dividend in 2016 at the rate of $ 0.175 a share a quarter that was hiked this year to $ 0.02 a share.
The circular i ndicates that in May 2013, Sandvine received an unsolicited expression of interest at $ 2.30 a share — a 15 per cent premium to the then share price.
They retained an advisor, who contacted 12 potential buyers — though none proceeded past the first stage of the auction process. In the end, only the original bidder pursued a transaction but backed away when Sandvine’s share price rose to $2.65 a share.
In late 2015, another private equity firm made an inquiry but after some initial meetings, “the parties determined that there was not enough strategic merit to proceed.”
Six months later a third private equity firm arrived, had a series of initial meetings, undertook a limited due diligence process, which produced a “non binding expression of interest,” in the $3.80 — $4.05 a share range. Later the range was moved to $4.00 — $4.15 a share.
After much work by Sandvine — a special committee (which retained financial and legal advisers) was set up and five meetings were held — the private equity firm couldn’t arrange the necessary financing “and discussions were terminated.”
Around this time, Vector Capital turned up with an unsolicited expression of interest in the $ 3.25 — $ 3.50 a share range. Not high enough, said Sandvine.
Buyers were still interested, and so a fourth private equity firm entered the fray: Those negotiations came unstuck when the potential buyer set $ 3.75 a share as its maximum price. But the situation at Sandvine changed in late 2016 when it announced sharply lower revenue expectations for the fourth quarter.
Last March Vector reemerged with a firm $ 3.75 a share — that became a firm $3.80 a share two days later.
The special committee did its work and determined the offer was fair. After accepting the $3.80 offer, the board decided that it not go through a “further market check process,” but insisted that a goshop provision be attached to the Vector transaction.
That inclusion drew four prospective purchasers, with PNI’s $ 4.40 a share winning the day. On Sept. 7 the shareholders will gather in Waterloo, Ont., to decide.