Santa Ana’s Powerwave Technologies Inc. could face a shareholder battle over its proposed $118 million buy of the commercial wireless business of Remec Inc.
SACC Partners LP, a Los Angeles-based investment fund, said Powerwave’s offer for the Del Mar-based unit is too little, setting the stage for a potential proxy fight over the acquisition.
The investment fund, an affiliate of Los Angeles broker-dealer B. Riley & Co., owns 7.5% of Remec, according to a recent filing with the Securities and Exchange Commission.
Powerwave makes radio frequency amplifiers for use in wireless phone networks. Remec has several units that make voice and data transmission gear. The company’s commercial wireless unit has annual sales of $250 million.
The sale also includes plants in China, Costa Rica and the Philippines. In 2003, Powerwave closed a Santa Ana plant and moved production to plants in Asia. The deal is expected to close by the summer.
Powerwave declined to comment on the filing. Neither Remec nor SACC Partners returned calls.
According to the filing, SACC said it has “concerns on whether the price is adequate” and that it intends to “contact the board and the purchaser in an attempt to learn why they feel the price is justified.”
“Depending on the results of these inquiries we may or may not determine to support the transactions and may determine to contact other shareholders,” the company said in the filing.
SACC has a $25 million stake in Remec based on its 4.7 million shares and a recent trading price of $5.4.
The shareholder dispute raises the possibility that Powerwave might have to pay more for the Remec unit, said Matthew Robison, an analyst with Ferris, Baker Watts Inc. in San Francisco. But that prospect is unlikely, he said.
“My sense is that if there were other buyers, it would have cost more,” Robison said. “I view Powerwave as an exceptionally smart buyer. They’ve been competing with Remec for years, so they know how much it’s worth. I’m operating under the assumption that Powerwave will not chase the price.”
But in an interview with the San Diego Union-Tribune, Wes Cummins, an analyst with B. Riley, said Powerwave’s offer was too low. Cummins told the newspaper that other wireless equipment deals have been valued at least at the level of the acquired company’s 12-month revenue,$250 million in the Remec case.
Remec, struggling with big operating losses in the past several years, has been shopping some of its units. Shareholders are expected to vote soon on the proposed sale of Remec’s defense business to Bolton, Mass.-based Chelton Microwave Corp. for $260 million.
For its part, 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 deal. The buy is expected to add to Powerwave’s profits by the first quarter of 2006.
Powerwave said its combined revenue for 2006 will be about $950 million with the acquisition. That’s up from the $662 million analysts had been expecting for Powerwave by itself.
