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Exclusive: Gilo Offers $45M for Vyyo

Jeff Baumgartner
10/14/2008

An investment group led by Davidi Gilo has made a tender offer for struggling 3 GHz overlay specialist Vyyo Inc. (Nasdaq: VYYO) for 17 cents per share, a 5 cent premium that values the transaction at roughly $45 million with debt and equity factored in.

Gilo, a former Vyyo board chairman, was the vendor's CEO from October 2001 through March 2007. He also held the CEO post from April 1999 through October 2000.

Vyyo has developed a technology that enables cable operators to expand their bandwidth to the 3 GHz range, creating headroom for capacity-eating services such as high-definition television, video on demand, and Docsis 3.0. Thus far, Vyyo has had difficulty scoring deals beyond early adopters such as Cox Communications Inc. and StarHub of Singapore. (See StarHub Goes Out-of-Band With Vyyo and Vyyo Wins Cox, Points to Others .)

The close of the tender offer, which includes debt and equity, is scheduled for Oct. 22, 2008. The company said it anticipates that the "NewCo" will continue to be steered by Vyyo chairman Jim Chiddix and CEO Wayne Davis. Chiddix, the former chief technology officer of Time Warner Cable Inc. (NYSE: TWC), and Davis, the former CTO of Charter Communications Inc. , joined Vyyo in March 2007. (See Vyyo Adds New CEO, Vice Chairman.)

Vyyo confirmed the tender offer with Cable Digital News Tuesday after rumors surfaced earlier in the week that the vendor was considering a bid by Gilo to take the company private. According to a 10-K filed in June, Gilo owned 4.96 million shares of Vyyo as of March 31, 2008, giving him a 25.1 percent stake. Also at that time, Goldman Sachs & Co. held 23.36 percent of Vyyo shares, followed by Gilder, Gagnon, Howe & Co. LLC, which owned 11.45 percent.

The tender offer comes three months after Vyyo warned that it was reaching the end of its financial runway and seeking more near-term funding or other alternatives that included a potential sale of assets. (See Vyyo on Life Support and What's Next for Vyyo? )

Vyyo noted today that it plans to use the Gilo-backed funding to focus on key areas such as "sharpening customer support efforts" and forming strategic partnerships, including licensing its "UltraBand" tap and passive technology to other suppliers.

It will also use those funds to integrate its UltraBand technology into a "single box" node that aims to make the technology easier and more cost-effective for MSOs to deploy. As envisioned, the resulting "UB ready node" will allow an existing 1 GHz node to be upgraded to 2.7 GHz with "drop in electronics," and installed without the need for parallel network amplifiers.

A company official didn't say when such a product would become available, but noted that it's at the point where Vyyo is comfortable discussing the concept with potential customers.

Earlier this year, Vyyo closed down its operations in Israel and shifted R&D stateside as part of a broader restructuring effort. (See Vyyo Cuts 70+ & Closes Israel Office and Vyyo Details Restructuring .)

Vyyo had 28 employees as of June 30. A company official declined to provide a current figure, noting that plans for the new company are still being determined and won't be known until the close of the tender.

Vyyo shares were trading at $0.12 in mid-day trading Tuesday, off from a 52-week high of $6.25.

— Jeff Baumgartner, Site Editor, Cable Digital News

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