Powerwave Technology Inc.’s contested buy of Del Mar-based Remec Inc.’s wireless unit finally could be coming to a close.
The two companies have reworked the terms of the deal to gain tax benefits for shareholders, a key demand of a dissident Remec investor.
Remec shareholders are set to vote on the sale Aug. 31. Remec and Santa Ana-based Powerwave now expect the sale to wrap up in September, two months later than first planned.
The companies said they’ve agreed to “modify the structure of the transaction to change certain of the assets and shares of acquired stock of the Remec subsidiaries to be acquired by Powerwave.”
“As we were looking at the transaction, there were some tax benefits we would realize if we were to restructure it,” said Donald Wilkins, vice president and general counsel for Remec.
Wilkins declined to comment on exactly how the deal would be restructured.
The financial terms of the deal haven’t changed, according to Remec’s outline to shareholders filed with the Securities and Exchange Commission late last month.
Powerwave is offering 10 million of its shares plus $40 million in cash for the Remec unit.
That worked out to about $118 million in early 2004, when the deal was announced. As of last week, the buy is worth about $150 million, thanks to a runup in Powerwave’s stock in the past year.
The increase in Powerwave’s shares,which are up nearly 40% this year,and the tax restructuring could go a long way toward addressing concerns of a key shareholder.
SACC Partners LP, an affiliate of Los Angeles investment bank B. Riley & Co., blasted the deal last year, saying Powerwave wasn’t paying enough and hadn’t structured the buy to minimize taxes on Remec shareholders.
At the time, SACC owned about 7.5% of Remec and now has about 9.5%, making it the company’s second largest shareholder after St. Louis-based Kennedy Capital Management Inc. at 10.2%.
In an earlier SEC filing, SACC said it intended to “vote our shares in favor of the current acquisition proposal of Remec by Powerwave provided that Powerwave and Remec are able to structure the current proposal in a tax efficient manner.”
SACC couldn’t be reached for comment.
The tax reworking has lengthened what already had been a long process.
Powerwave, a maker of amplifiers and other equipment for wireless networks, started courting Remec for its voice and data transmission gear early last year.
Remec’s commercial wireless unit,the one Powerwave is buying,has annual sales of $250 million. The deal includes plants in China, Costa Rica and the Philippines, according to SEC documents.
In 2003, Powerwave closed a Santa Ana plant and moved production to plants in Asia.
Powerwave said the Remec buy will help to strengthen its position in antenna and base station service and add about 90 patents to its intellectual property portfolio.
The company said it expects to see more than $50 million in annual cost savings from gains in manufacturing, purchasing, research and development and sales operations from the Remec buy. The deal also is expected to add to Powerwave’s profits by the first quarter.
Remec has struggled with big operating losses in the past several years and had shopped some of its units around to different buyers.
Earlier this year, Remec sold its defense business to Bolton, Mass.-based Chelton Microwave Corp. for $260 million.
