SANTA BARBARA, Calif.-724 Solutions Inc. says its minority shareholder, Austin Ventures L.P., has offered to buy the company’s 5.5 million outstanding shares of common stock for about $17 million, or $3.07 per share.
News of the proposal came after the financial markets closed Feb. 27, but the low-ball offer has not helped the company’s stock price. Having closed that day at $3.64 per share, the stock was trading at $3.32.
Austin Ventures and its affiliates already own about 38 percent of 724 Solutions’ common stock.
724 Solutions develops wireless Internet Protocol-based network and data services technology. The company has development offices in Canada and Switzerland while its corporate headquarters are in Santa Barbara, Calif.
724 Solutions said it formed a special committee “composed entirely of directors who are independent of management and of Austin Ventures to consider potential value-enhancing strategic transactions for 724 Solutions’ shareholders.”
The company explained that the buyout proposal requires court approval as well as approval from a majority of its shareholders other than Austin Ventures and its related parties.
Signs of troubles at 724 Solutions surfaced in October when Hewlett-Packard Co. dropped the company as a subcontractor for its access gateway solution deployment with Sprint Nextel Corp. At the time, 724 Solutions said the change could reduce its revenue from HP by $500,000 per month, but the company also said it would continue in talks with Sprint Nextel for alternate uses for its technology within the carrier’s CDMA network.
Last year, the company reported a net loss of $6.1 million from revenues of $18.3 million, compared with losses of $8 million from revenues of $15.1 million in 2004.
