Rakon shareholder wants light shed on $400 million bid
An unhappy Rakon shareholder says the tech company is forcing investors to glean information about a potential buyout of the business from the media.
The New Zealand stock exchangelisted firm (NZX) received a $400 million bid for the business, valuing each share at $1.70 in December. The buyer was named in Australian media as Nasdaq-listed chip maker Skyworks.
Shareholder Mike Daniel said the New Zealand semiconductor chipmaker should, at a minimum, confirm the name of the bidder.
Daniel is concerned that shareholders selling at a discount to the offer price of $1.70 may not have sold their shares if the company had been more forthcoming with information.
Some shareholders may not have seen the media reports that named a potential buyer, for example, Daniel said.
The bid
Rakon informed markets of the confidential offer on December 11. In that market notice, the company effectively said its hand had been forced because some shareholders and not others may have known about the proposal.
It said on December 7, it received an unsolicited, non-binding indicative proposal (NBIO) from a credible industry player “with a view to entering discussions about a potential acquisition of all of Rakon’s shares”.
“The proposal is incomplete and highly conditional and, as a result, there can be no certainty that any transaction will eventuate.
“The proposal was confidential when received, and ordinarily, the receipt of a proposal at such an early stage would not require disclosure.”
Then, Rakon’s shares were trading at about 62 cents. The share price jumped to about $1.20 on news of the unsolicited bid but has since fallen to about $1.
Daniel complained to the “ultimate market regulator”, the Financial Markets Authority (FMA). The FMA confirmed it had received a complaint.
Daniel had also repeatedly written to Rakon and its chair, Lorraine Witten, asking for it to at least tell Rakon investors whether the talks continued.
Rakon said in an emailed statement that its board was mindful of and paid close attention to its continuous disclosure obligations to release material information to the market in accordance with the listing rules.
“Rakon is committed to keeping shareholders informed in accordance with those obligations but is otherwise subject to confidentiality restrictions.”
Early disclosure
Sources with knowledge of the situation told BusinessDesk that Rakon disclosed the bid unusually early in the process, which extended the time it appeared to take to get a resolution.
They said it was not of concern that the potential sale was ongoing now, four months after that first market notice.
“These things are sensitive and complex; they take time.”
Independent market watchdog NZ RegCo said that in the absence of any further updates, the market should be able to continue to rely on Rakon’s announcement on January 18 and assume that the process remained incomplete, albeit ongoing.
“Under the rules, [Rakon] must update the market if there are developments that comprise material information. However, that does not include the progress generally of the NBIO process, which remains
information concerning an incomplete proposal or negotiation. The rules don’t preclude [Rakon] from voluntarily updating the market on the NBIO process, but such an update may depend on the engagement terms under which [Rakon] has agreed to negotiate — those would conventionally include confidentiality provisions.”
New Zealand Shareholders Association chief executive officer Oliver Mander said Rakon’s January 18 update was sufficient. Its last stated position was still accurate.
In January, Rakon said its independent committee overseeing the bid was continuing to assess whether the buyout was in the best interests of shareholders as a whole and could be developed into a transaction to be presented to shareholders for consideration.
“No action is required from shareholders at this time.”
It said there was no certainty that any transaction would eventuate, including as to the terms or timing of any transaction.
“Rakon will continue to keep shareholders informed by market announcement in accordance with its continuous disclosure obligations but, given the confidentiality agreements it has reached, will not otherwise be providing further comment.”
Who is Skyworks?
US giant Skyworks was outed as the alleged bidder in late February, with Goldman Sachs reportedly handling the transaction for Rakon.
Goldman Sachs declined to comment.
The company is listed in the US and uses Rakon parts.
Skyworks’ largest customer is Apple, the iPhone maker.
Skyworks did not respond to a request for comment.
It reported its first-quarter earnings result on April 30.
Skyworks dwarfs the New Zealand business, reporting revenue of US$1.046 billion (about $1.7b) for the quarter ended March 29.
In comparison, Rakon reported revenue of $61.3 million for its most recent half-year result in November.
Rakon is due to report its full-year result on May 29, when it will likely also update shareholders on the buyout offer.
It has more than 1000 employees and six global research and development centres, with four manufacturing sites.
Rakon says its products provide the “electronic heartbeat for thousands of systems around the world”, including for mobile phone networks.
It turns quartz crystals into radio frequency control systems that create extremely accurate and stable electric signals to generate radio waves and synchronise time in everything from 5G networks and satellites to autonomous vehicles and emergency beacons, the company says.
Opportunistic
In December, analyst Forsyth Barr called the bid “opportunistic”.
In April, it said it anticipated Rakon would update investors about the takeover offer, first announced on December 11, 2023, with the annual result at the end of May.
Rakon said underlying earnings before interest, tax, depreciation and amortisation (Ebidta) would be in the range of $13m to $19m.
Forsyth Barr expected Ebitda at the lower end of the guidance range at $13.9m and net profit after tax of about $4.4m, a decrease of 81 per cent.
Rakon’s telecommunications segment was experiencing weakness, with Nokia and Ericsson reporting notable revenue declines, Forsyth Barr said.