Deal Reporter 11/21 - 5:40pm
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November 21, 2011 5:40 pm
InterDigital’s strategic review seen making limited progress
By Lori Silverman in Washington DC and Ed Mullane and Bhavna Kaul in New York
This article is provided to FT.com readers by dealReporter—a news service focused on providing insightful intelligence on event driven situations to investors. www.dealreporter.com
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InterDigital’s (NASDAQ:IDCC) review of strategic alternatives remains quiet, three sources following the situation told dealReporter.
Shares of the intellectual property (IP) company jumped from around USD 45 to over USD 50 last week before settling down to around USD 48. On 14 November, Paulson & Co disclosed a 6.6% stake as of 30 September.
Despite the recent rally, a number of sources familiar with some of the parties who expressed interest in acquiring the company, said they have not heard of the process progressing.
In July, InterDigital announced it hired Evercore and Barclays to review strategic alternatives for the King of Prussia, Pennsylvania-based intellectual property company. Two months later in September, the company said it continued to explore a sale of all or parts of the company, but InterDigital has provided few other updates on the process.
One source said the process stalled over the past few months when the price expectations the company was demanding remained too high. A source following the situation in Asia also said that he had not heard of the process making any headway.
InterDigital declined to comment. This news service was unable to gauge the status of the talks with all potential suitors.
InterDigital may be awaiting a decision from the Court of Appeals for the Federal Circuit in its case again Nokia before deciding what the next step will be in its strategic review process, said patent lawyers following the process. A decision is still pending from oral arguments heard on 13 January, in InterDigital v. International Trade Commission.
Buyers’ willingness to pay up for InterDigital’s intellectual property may come down to the infringement case. One patent attorney following the litigation argued that “one thing that puts buyers off is patent infringement litigation. Or, if InterDigital loses the infringement case, that can devalue the company”.
This patent attorney noted that if the Federal Circuit affirms the decision, and decides against InterDigital, existing licensees may find a path that would no longer require the payment of royalties under current licensing agreements, thereby lowering the valuation of the company.
“InterDigital needs to fight this to the end, otherwise they lose royalties on Nokia, in addition to royalties from other companies that license from InterDigital,” the attorney said. Many companies may have licensing agreements using the same patents in the litigation, he added.
One source close to a potential suitor said that a company typically puts its most valuable assets before a court. However, this source added these patents are not expected to change the level of interest in the asset. It has more to do with the valuation the company has placed on the assets and how encumbered these assets are, he said.
In September 2007, the ITC initiated an investigation in response to a complaint filed by InterDigital, alleging that Nokia had infringed by Nokia’s 3G WCDMA handsets.
In an initial ruling on 14 August 2009, an administrative law judge ruled that the patents were valid and enforceable but had not been infringed upon. The dispute worked its way up to the Federal Circuit.
Judge Pauline Newman, who is responsible for writing the decision and has a history of being very technical and thorough in her analysis before coming to a decision, is in her eleventh month of deliberation.
Additional reporting by Louise Bleakley in San Francisco and Tim LeeMaster in Hong Kong
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