UBS considers mergers, acquisitions and sales in bid to boost shareholder value

Unique Broadband Systems Inc is willing to consider a merger or sale of certain assets to ward off a potential cash crisis in the wake of two senior resignations and the end of a major contract with Hughes Network Systems. The Concord ON-based company has enlisted a group of high profile directors, including former Prime Minister John Turner, to head a special committee to review operations and look at ways to "maximize shareholder value" (see box). UBS’ stock price has plummeted from a high last year of $17.85 to just $0.77. The company is a bit of an anomaly in the high-tech sector. As an R&D shop still a year away from launching its prized wireless OFDM-based modem, the company has remained cash flow positive since its inception, primarily as a result of its $66-million contract with Hughes to design and build a terrestrial repeater network. "We’ve always been an R&D company. It was a lucky break with this large contract and it has given us a lot of money," says Jeff Friedman, executive VP administration and general counsel at UBS. "We’ve never really pretended to be anything but an R&D company and because the products won’t be ready until next year, people may just not want to sit around with no revenue coming in for a year." Unique Broadband also lost a revenue stream when Look Communications Inc decided to scale back network expansion plans earlier this year. With the Hughes funding pipeline now ending, and no new contracts in sight, UBS executives want to ensure enough money is available to complete development of its wireless OFDM-based modem and video distribution system. Friedman says a number of technical issues surrounding the fixed wireless modem still need to be worked out, including line-of-sight and multipath issues. But the ultimate goal is to market and sell an OFDM-based modem that can operate in both the fixed wireless and mobile wireless worlds, he says. Depending on the outcome of the committee’s review, he says those steps could include a merger, an acquisition or the sale of certain assets. "Maybe there’s companies out there with good businesses, but no money," he speculates. "Maybe we put ourselves together with them and have a good business with good potential in the product development pipeline as well and take advantage of that. Maybe that’s what shareholders want. Ultimately it goes to a vote, but we just want to canvass what’s out there." The company is also looking for a new corporate head to replace Alex Dolgonos, who resigned July 18 as president, CEO and chair although he will remain a director and act as a technical consultant to the company. Stephen Rosen, EVP and CFO, also resigned the same day. Patrick Lavelle will take over as interim president/CEO and the company controller, Cameron Smith, will be interim CFO. With a healthy balance sheet and money in the bank, the health of the one-time media and market darling is not in question, according to the company’s interim CEO and head of its special directors’ committee. Lavelle insists the review is simply a strategic move by the board and management to examine UBS’ options. Given the company’s stock performance over the past year, he adds that such a review could also help reassure anxious shareholders. "The stock is under pressure. It’s down from (a high of) $17 to less than a buck at the moment," he says. "So shareholders and others are looking for an answer to the future and that’s what we’re going to try and give them."

UBS considers mergers, acquisitions and sales in bid to boost shareholder value

News | August 7, 2001

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