Anaheim-based circuit board maker Multi-Fineline Electronix Inc. may just yet get out of an unwanted deal.
The company, known as M-Flex, is contesting an arranged marriage with sister company MFS Technology Inc. of Singapore. Both M-Flex and MFS, another circuit board maker, are owned by Singapore’s WBL Corp.
In March, M-Flex offered to buy MFS for $500 million in a deal backed by WBL, a holding company for a wide range of businesses, including electronics and real estate development.
Now word from Singapore is WBL may not be so hot on the deal after months of wrangling by M-Flex, including a lawsuit against its parent company.
WBL has let lapse an offer to sell its 55.7% stake in MFS to M-Flex. The company’s original offer to sell the shares,dubbed an “undertaking” in Singapore,dates back to March and expired at year’s end.
“We are not extending the letter of undertaking currently,” the XFN-Asia news service recently quoted an unnamed WBL source as saying.
Instead, WBL is seeking legal and financial advice on what to do next, according to the report.
That could put an end to the drawn-out saga that was intended to create one of the world’s largest makers of flexible circuit boards for mobile phones and other devices.
M-Flex representatives declined to comment. Early on, M-Flex said it hoped to expand production by acquiring MFS. Soon after the deal was announced, MFS posted an 8% drop in quarterly sales and a nearly 50% freefall in gross profits.
M-Flex, which also issued its own profit warnings last year, went to court to force WBL to vote against the combination.
If WBL voted in favor of the acquisition, the parent would “be breaching its fiduciary duties and obligations to M-Flex’s minority stockholders,” M-Flex argued.
“M-Flex must rely on WBL to vote against the offer in order to prevent substantial harm to the company,” the company said late last year. “Unfortunately, WBL has notified M-Flex that despite M-Flex’s offer to release WBL from its obligations … WBL believes it is required to abide by the agreement and vote in favor of the offer.”
M-Flex also sued a pair of hedge fund investors that want to see the deal go through, claiming they had not disclosed ownership of 32 million MFS shares.
The funds also own 18% of M-Flex.
Deal Deadline
WBL’s offer to sell its MFS shares expired along with M-Flex’s own deadline for meeting preconditions of the deal.
The conditions needed to be met before the Securities and Exchange Commission would sign off on a registration statement for the deal.
Days before the Dec. 31 deadline, Singapore regulators refused for a second time M-Flex’s bid to pull out of the deal and suggested M-Flex move the preconditions deadline to March 31.
M-Flex agreed this month to extend the deadline, all the while continuing to discourage shareholder approval of the deal.
The ordeal, and a slowdown in business
at M-Flex, have taken their toll on the
company.
After a huge run-up in 2005 and early 2006, M-Flex saw its shares plunge some 70% in the second half of last year.
The company counted a recent market value of about $450 million,less than its offer for MFS.
M-Flex makes circuit boards for phones from Motorola Inc., like the sleek Razr V3.
The company’s circuit boards allow Motorola engineers to manipulate the guts of a phone to fit the most stylish of designs.
Motorola makes up some three-fourths of M-Flex’s $500 million in yearly sales.
Other customers include Symbol Technologies Inc., Royal Philips Electronics NV and Research In Motion Ltd.
