Comverse Unloads Ulticom to Platinum Equity for $90m

New-Jersey based company has long been on the shelf and is the first of Comverse's subsidiaries to be offloaded.

Ulticom, a 66.4%-owned subsidiary of Comverse Technology, will be taken over outright by Platinum Equity, a private equity buyout firm based in California, for about $90 million.

Shawn Osborne- Youtube

The company announcement, released on Tuesday, said that shareholders will receive a total of $8.07 per share, representing a premium of 5% over the previous day's closing price. The deal, subject to approval by Ulticom's public shareholders, is expected to be completed before the end of the year.

Payment to shareholders will take place in two stages: distribution of a special cash dividend of $5.74 per share, to be followed by a payment of $2.33 per share to complete the transaction.

"After a careful and extensive review of our strategic alternatives, our board of directors has determined that the premium to the current market price provided by this transaction offers the best value for our stockholders," said Shawn Osborne, Ulticom president and chief executive officer. "Furthermore, Platinum Equity's financial resources and experience with communication and information technology companies will reinforce Ulticom's ability to enhance our product portfolio and market position."

New-Jersey based Ulticom, which employs 143 people, supplies telecom networks and service providers with software for interconnect capabilities. The company has long been on the shelf and is the first of Comverse's subsidiaries to be offloaded.

But Verint Systems and Starhome may soon follow. Verint, a U.S.-based provider of products and services for workplace optimization in organizations, is a competitor of Ra'anana-based NICE Systems and is considered a much more attractive buyout prospect than Ulticom. Fully-owned Starhome supports roaming services for mobile telecom providers.

Ulticom was first listed on NASDAQ in 2000, the height of the dot-com bubble, raising about $55 million on 4.25 million shares sold at $13 apiece. Later, the same number of shares was again sold, this time at $50 each, or $212.5 million in total. But these included 1.4 million shares sold by Kobi Alexander, the founder and, at the time, CEO of Comverse, so that Ulticom actually raised only $142.5 million on the share issue. At its peak, the company had a market cap of over $2 billion.

Comverse began cashing in on assets after announcing in August that it would be about $50 million short of what it needed for its operations in the fiscal year ending on January 31, 2012. Since then it has sold a property in Ra'anana to George Horesh for $29 million, and Verint issued a prospectus to sell 1.8 million shares owned by Comverse for $40 million. With the sale of Ulticom and 10% of its stake in Verint, Comverse should find itself financially back from the abyss.

Comverse also announced that it is cutting $45 million in operating expenses: It has just laid off 400 employees, and it intends to carry out another round of cutbacks of a similar scope in 12 to 18 months. And in August, the company hired Goldman Sachs to explore ways to raise new capital, so it is not improbable that it will soon be selling off more of its assets or ownership stakes in its subsidiaries.

The Wall Street Journal named IBM, Hewlett-Packard and Amdocs as companies that are likely to take an interest in acquiring Comverse assets. It also said that private equity firms Permira and Silver Lake Partners could take an interest in Verint specifically. Silver Lake controls Avaya, a company whose operations are similar to those of Verint, and could be interested in merging the two companies' operations.