This is not a prediction just putting my thoughts out there for discussion:
I am going to assume that the bidders were asked to bid atleast $3B with a breakup fee of $1B... Also, no shares could be purchased until the SA was officially concluded by the company.
Lets just assume that a bid was made and accepted at this amount and the deal was announced. Any hostile bids at that point would need to be north of $4B if the breakup fee was bilateral. (not sure if that is typical) (The MMI / GOOG breakup fee was huge and I think shows that GOOG was desparate at that point in time.) Anyway, a hostile bid could them be made at $4B or higher. At that point the other bidders would be free to purchase shares in the open markets but the share price would be about $60 or so after the announcement. If a hostile bidder wanted to buy say 5M shares in the open market it would be impossible to do so without chasing the price much higher. This seems like an impossible scenario without some sort of hard deadline which was not in place.
Any serious bidder could just wait until the announcement of conclusion of the process and be legally able to purchase shares on the open market. This week 5M share could have been easily picked up for about $36 per share. The bidder would now own 10% of the company. (disclosures would be needed within a few days) Now that same bidder could bid say, $2.5B for the company which is now a pretty good premium (~50%) with no breakup fee. That potential acquirer already owns 11% acquired during the obvious future selloff and it only cost $180M vs $300M for the same shares during the SA. Now if a bidder wanted to beat the first hostile bid, the process is simpler and a breakup fee is not mandatory.
This second scenario is much less risky for all the bidders. IMO, the SA would only have worked given a hard deadline. The one thing the SA did achieve is transparency and time for analysis of the assets. I am guessing that this risk was outlined to management going into the process. IMO, management just might have a couple of licenses ready to sign but will wait a short time to see how this unfolds. I would think that the potential of Interdigital getting into an aggressive NPE's hands or even broken up scared some infringers straight. If I were LG I would ask for a ling deal just to lock in certainty. I am seen CFO's in the past accept flat costs they can budget, even with the possibility of costs going down in the future, because they could also go up. The action on the stock sure smelled like a large buyer grabbing shares without the patient accumulation we have seen before. IMO, this scenario will have to play out very fast, like weeks not months. Again not predicting this but it does make sense. As I have said before either way we are in better shape because Clontz is not F'ing around anymore.
Dclarke
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