Timing issues confront Sandvine shareholders

Competing offers face deadlines

Maybe, even just once, a company could decide to make life a little easier for its shareholders, particularly in a situation where there is a contested takeover and where timing issues are at the forefront.

By way of introduction that brings us to Sandvine Corp., a company that deals with “network policy control solutions,” and which has received offers from two U.S. private equity firms: the first one at $4.15 a share from Vector Capital, and the other at $4.40 a share from Francisco Partners.

Both offers are the second by each bidder: Vector originally bid $3.80 in a deal that was accepted by the company with a meeting date set for next Tuesday; Francisco then entered the picture with a $4.15 share offer, which was deemed to be a “superior proposal”; Vector matched at $4.15 on July 6; and finally Francisco upped its bid last Friday to $4.40.

But despite the higher price that is on offer from Francisco, Sandvine said its board continues to recommend a transaction with Vector.

Here’s the timing dilemma: Sandvine notified Vector last Friday (after Francisco lobbed in its $4.40-a-share offer) that it had five business days to match Francisco’s offer. That five-day window ends at 5 p.m. Friday. But the deadline for the proxies is Friday at 11 a.m.

Given that in almost all cases, the owners prefer a higher price, the question is what to do.

One investor summed up the situation this way: “If I wish to support the $4.40 offer, I must instruct my proxy to vote against management’s recommendations. But if management subsequently changes its recommendation I would vote with them for the superior proposal.”

Complicating that problem is that this investor, who doesn’t live in Ontario, doesn’t have a person to nominate as a proxy and reflect his wishes.

In addition there is no proxy form for the $4.40-ashare offer from Francisco. In materials included in the circular, there is only a proxy form for the Vector $3.80-ashare offer.

(Using that form he could go on-line, use the control number and vote against the Vector offer.)

So what’s a possible solution to get shareholders out of this potential mess?

The best outcome would be for Vector to match the Francisco offer, receive the support of Sandvine and allow shareholders to support that offer before 11 a.m. Friday. Another solution would be for Sandvine to change the meeting date by a couple of days, which would give shareholders full information before making their decision.

This investor mused about whether the best solution would be not to vote. To get over the line, two conditions have to be met: the support of at least twothirds of the votes cast and; a majority of the minority.

(The minority is the small stake held by the insiders.)

If this investor, who is making a decision on the basis of incomplete information, doesn’t like the $4.15-per-share deal, the best thing is to be on the no side.

To gain some idea into what Sandvine may be thinking, we sent emails to the company, specifically to the head of investor relations and the head of media communications. The former didn’t return the email while the latter is out of office until Monday.