Telco TV equipment vendor Next Level Communications Inc. last month urged its stockholders to reject Motorola Inc.'s unsolicited tender offer to acquire all outstanding shares of Next Level stock it doesn't already hold. Next Level also revealed that it has filed suit again Motorola for what it sees as an unfair offer. The news was announced at Next Level's recent upbeat review of its fourth quarter and year-end 2002 financial results.
Next Level called Motorola's offer to pay $1.04 each for the outstanding Next Level shares "inadequate" and said that "the process Motorola is using to squeeze out the minority stockholders is unfair." The Next Level board's decision was based upon the unanimous recommendation of its independent committee, which constitutes a majority of the entire Next Level board.
"Over the past two years, Motorola has taken steps to try to ensure that it is our sole source of financing. Now Motorola is attempting to take advantage of Next Level at a time when its stock price is depressed and we are unable to fully communicate the strength of our business to our stockholders because of non-disclosure agreements with our customers," said the independent committee in its ruling. "We believe Motorola is attempting to coerce Next Level minority stockholders into accepting an inadequate offer which significantly undervalues the long-term potential of Next Level. We do not support an inadequate offer and a process that is unfair to our minority stockholders.
"We believe that Motorola has made its unsolicited offer directly to Next Level stockholders to attempt to avoid negotiating with Next Level's Independent Directors, who have fiduciary duties to protect the interests of our minority stockholders," says the committee.
The Next Level board believes that Motorola's unsolicited tender offer significantly undervalues Next Level's long-term prospects. In particular, the Next Level Board believes that Next Level's continuing progress with the RBOCs and other major North American telecommunications service providers could result in significantly increased revenue and operating performance. Next Level's achievement of its financial projections throughout the past year also gives the Next Level board increased confidence in Next Level's abilities to achieve its future financial projections, according to the company.
Motorola's unsolicited tender offer represented only a 14 percent premium to the 91 cents closing price for the shares on Jan. 10, and represented a 14 percent discount to the average closing price of $1.22 for the shares for the 12 months preceding Jan. 10, not-withstanding the substantial improvement in the financial condition and prospects of Next Level over that time period, says Next Level. Since the commencement of Motorola's unsolicited tender offer, shares of Next Level common stock have consistently traded higher than the $1.04 Motorola offer. The closing price per share on Nasdaq on Feb. 3, was $1.25.
Next Level, Next Level Partners LLC, the owner of more than 1.8 million Next Level shares, and Spencer Segura and Jacqueline Segura, the owners of approximately 600,000 Next Level shares, last month filed suit against Motorola in the Court of Chancery of the State of Delaware, in and for New Castle County. Plaintiffs allege among other things that Motorola violated the non-disclosure agreement between Next Level and Motorola by using confidential information from Next Level to plan, launch and carry out the Motorola offer; Motorola breached its fiduciary duty as a controlling stockholder of Next Level; and that the Motorola offer is "coercive" on a number of fronts.
