Some fallout from the various asset offloads we have seen from Nokia (NYSE: NOK) in the last year: Synchronica, which bought Nokia’s messaging business for $25 million in June 2011, has itself become a takeover target — apparently because it will not be able to make payments on money still owed to Nokia.
UK-based Synchronica’s main suitor is the Switzerland-based Myriad Group, which develops mobile software services that it says have been loaded into some 2.5 billion devices, including every Android device.
In a market announcement from Myriad, it outlines the main reasons why it believes Synchronica needs to sell itself:
Essentially, Synchronica owes Nokia $20.2 million by December 31, 2015. However, “the Myriad Board does not believe that Synchronica, given its current financial position and future prospects, will be able to repay the Nokia Debt and would also question Synchronica’s ability to meet the current repayment schedule in the short term.”
Myriad says it has had confirmation from Nokia that were Synchronica to be sold, the buyer would not need to pay the outstanding debt immediately.
A Synchronica spokesperson, meanwhile, would not confirm whether Myriad’s assertion over the inability to make Nokia payments was true or not.
Earlier this month, Synchronica issued a statement that said it expects to report full year 2011 revenues of approximately $23 million, “marginally ahead of market expectations”, and an increase of 111 percent compared to 2010. However it also posted increasing losses over the course of last year.
Synchronica purchase of Nokia’s messaging gateway business in June 2011 promised a big step up for business. It’s not clear, however, whether that messaging business was actually profitable to run when it was bought by Synchronica — and if Myriad’s assertions are true, Synchronica may not have been able to make a go of it in any case.
Before the Nokia buy, Synchronica focused on messaging services for emerging and developing markets. The Nokia deal, at the time worth more than the market value of Synchronica itself, gave the company entry to more mature mobile markets: it included the transfer of 10 carrier customers — including AT&T (NYSE: T), Verizon, T-Mobile and Sprint (NYSE: S) — which used Nokia’s technology in their own-branded messaging and email services, covering some six million users. The revenues from those deals were never disclosed by Synchronica but they worked on a per-user, per-month basis and were recurring.
The original deal also included a payment from Nokia to preload those messaging services into its own devices for a further 18 months, worth $18.2 million; a long-term relationship for further development of the messaging gateway and client software; the transfer of 250 employees; and 10 patents with royalty-free licensing for a further eight still owned by Nokia.
Myriad is offering £20.63 million ($32.5 million) for Synchronia, or 13 pence per share, according to the statement. This is the second time that Myriad has made an offer for Synchronia; the first, back in November, was rejected by Synchronica’s board, and the two sides have been negotiating since then. Today’s offer represents a premium of 70.49 percent on the company’s trading price on November 10, the day before Myriad’s first offer.
Myriad, which itself has a market capitalization of approximately 197.05 million Swiss francs ($214 million), develops linux-based and java-based software solutions — for example a piece of software that unifies all a users’ contacts from different social networks into a single screen — as well as services for other consumer electronics devices such as connected TVs.