Megasoft Bids for Boston Comms
Megasoft, a small but growing Mumbai-based firm that already offers outsourced software development services and OSS products to carriers in Asia/Pacific, Europe, and the Americas, is offering $3.60 per share for Boston's stock, which closed Tuesday at $1.99. (See MegaSoft Reports Q1 and MegaSoft Launches RoamFree.)
Megasoft, which has cocked its hat at the history books by setting up a subsidiary called Tea Party Acquisition Corp. to make the purchase, will begin a tender offer for all of Boston Comm's shares on August 1. The offer will last 20 business days, with Megasoft requiring 83 percent acceptance from Boston Comm's shareholders.
Not surprisingly, the move sent investors racing into Boston's stock, which climbed $1.43, nearly 72 percent, to $3.42 in pre-market trading this morning.
Megasoft's move follows its acquisition of fellow Indian outsourced software development firm VisualSoft in October last year, which also bolstered its telecom capabilities. (See Megasoft Buys VisualSoft.) This deal, though, will provide greater challenges, as Boston Communications, which has been trying to expand its services portfolio as its traditional managed billings services business wanes, has had a turbulent past year.
It announced an internal review of stock option grants in mid-2006 and has not filed a complete quarterly report since July last year while it prepares its financial restatements, leading to delisting warnings from Nasdaq. (See BCGI Gets Notice, Boston Comms Plans to Restate, and Boston Comms Reports Q2.)
It has also been experiencing a decline in revenues as major customers such as Verizon Wireless and Cingular Wireless (now part of AT&T Inc. (NYSE: T)) migrated off its managed billing platform during 2006. Its main remaining carrier customer for that service is Sprint Corp. (NYSE: S).
As a result, the company cut 93 jobs, about 20 percent of its total staff, in April this year, and is currently without a full-time CEO. Boston Comm's CFO Joseph Mullaney, a relatively new recruit at the firm, is acting CEO. (See BCGI Names New CFO.)
"We are extremely excited about this transaction and the resulting benefits to our shareholders, customers and employees," said Mullaney in the company's prepared statement.
Mullaney will be particularly excited, as he is line for a $200,000 bonus should the acquisition be completed, according to a filing made with the Securities and Exchange Commission (SEC) today. Boston's General Counsel Tim Donovan will also be handed the same lump sum upon completion, while Chief Operating Officer Ersin Galioglu will pocket $50,000.
— Ray Le Maistre, International News Editor, Light Reading