Shah Capital Offers 36-Percent Premium to Purchase UTStarcom

Andrew Klips  |

Shares of UTStarcom Holdings Corp. (UTSI) have gapped ahead on Wednesday after Shah Capital Management put an offer on the table to take the Chinese telecommunications company private for $3.20 per share in a deal worth about $125 million. The offer represents a 36 percent premium UTStarcom’s closing price on Tuesday of $2.36.

Based in Beijing, UTStarcom has been involved in the Internet Protocol television industry as a portion of its offerings until completing its divesture in that underperforming space last August to focus on more the more lucrative business of providing next-generation media operational support services and higher value-added broadband equipment offerings. UTStar used to be headquartered in Alameda, California, but moved its corporate offices to China in 2010.

Shah already owns about 6.55 million shares, or 16.8 percent, of the roughly 39.02 million shares that UTStarcom has outstanding, according to SEC filings. Shah said that it expects to spend about $103 million to acquire those shares that it doesn’t already own.

About two weeks ago, UTStarcom received a non-compliance letter from Nasdaq giving the company 180 days to meet continued listing requirements related to price per share. The company said that it intended to execute a 3:1 reverse split to increase its share price.

In the fourth quarter, as reported on March 18, UTStarcom saw non-GAAP revenues decrease by 13.0 percent compared to the year prior quarter to $41.0 million. Adjusted net loss for the quarter was $6.7 million, or 5 cents per share, compared to a net loss of $2.7 million, or 2 cents per share in Q4 2011.

For the full year 2012, non-GAAP revenues declined by 12.2 percent to $157.3 million. Full-year adjusted net loss was $16.4 million, or 11 cents per share, versus net income of $2.5 million, or 2 cents per share.

The company ended 2012 with approximately $180 million in cash.

Shares of UTSI are trading ahead by 20 percent in morning action on Wednesday at $2.84, oddly short of the buyout offer. Across the past 52 weeks, shares of UTSI were down about 43 percent as of Tuesday’s close.

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