Portfolio Company Getting Acquired at 48% Premium

Tii Network Technologies (TIII) is a small communications company that accepted an offer of $33 m from Kelta Inc on Monday. This offer values company’s shares at $2.15/share which is a 48% premium to the stock’s closing price on Friday.

Based on the assets, I feel that this acquisition is a good price for Kelta to pay, and Tii could have negotiated a better deal. However, the going forward revenue outlook for TIII is a bit murky and no doubt that has played on the management’s mind during the negotiations. Tii is also recovering from a past acquisition that has failed to live up to the promise. Kelta manufactures products for Tii on contract, so they are acquiring a complementary business. The resulting margin expansion creates synergies for the acquirer.

The acquisition is expected to close in Q3.

I have held TIII in the VSG portfolio for a long while, originally acquiring shares in 2009 at an average cost of $1.18/share. Over the years, I have sold a part of my holdings in a few different transactions, ranging from $1.7/share to $3+/share. I will be exiting the rest of my position in this stock this week.

There are a few more companies in my portfolio that are ripe for acquisitions. They are severely undervalued, and management is either looking or are highly motivated to sell the company for various reasons. Try the Premium service to find out more.

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