As previously rumoured, US cost, routing and revenue management vendor TEOCO has made a formal bid to take over Israeli OSS vendor TTI Telecom. TEOCO is offering USD 3 per share, a premium of 50% that values TTI at USD 58 million, in an all-cash deal that would take TTI off the Nasdaq. However, there is still the prospect of another buyer coming in; TTI may solicit superior offers until July 9, though TEOCO will have the right to match any such offer and would get an undisclosed break-up fee if their offer is ultimately rejected. You can read about the deal in the TEOCO press release.
The combined firm would have over 600 staff and 75 communications provider customers. The deal makes sense for TTI’s shareholders. With significant consolidation in the OSS sector this year, TTI alluded to the competitive challenges as one reason why it is in favour of the deal. TTI CEOs have come and gone in the last few years, but it was unclear if TTI would be able to keep pace with the R&D of rivals and thus develop future growth products. The benefits to TEOCO are less obvious, though I think the key to the deal is that it greatly expands TEOCO’s international footprint. To date, the bulk of TEOCO’s customers are in North America. Acquiring TTI will extend their reach into Europe, Asia and Africa.
The actual cost is only $27mil = 58-31
TTI FS “As of March 31, 2010, the Company had approximately 31 million dollars in cash and cash equivalents”