E Ink Buyer Amends Merger Offer After Shareholder Unrest

9/30/09

After some E Ink shareholders said they would block a merger between the Cambridge, MA-based firm and Taiwan’s Prime View International (PVI), an amended merger agreement has gained enough shareholder support for the deal to reach fruition, both companies report.

E Ink shareholders had complained PVI’s initial offer of $215 million in cash, made in June 2009, was too low, given the fast growth and strength of E Ink’s sales of its electrophoretic ink technology used in handheld electronic devices such as the Amazon Kindle and the Sony Reader. The new agreement gives shareholders of privately owned E Ink $215 million in cash as well as a total of 120 million shares of preferred stock in the combined company; the preferred shares will be converted into common stock in four blocks of 30 million shares when the stock price reaches certain values from about $1.56 per share to $2.50 per share, based on today’s exchange rates. (That means the first 30 million shares will be converted from preferred to common stock when the price reaches $1.56 per share, and so on until the fourth and final block of preferred stock is converted to common stock once the price reaches about $2.50 per share.)

Wade took a deep dive into the proposed merger between E Ink and PVI after the deal was first announced in June, explaining why PVI’s initial offer may not have been a great deal for E Ink shareholders. E Ink sales were $96 million in the first nine months of 2009, and grew at more than double the rate they grew last year, according to E-Ink. PVI, a leading maker of display screens on electronic devices, says it is E Ink’s largest customer and accounts for more than half of E Ink’s revenue.

E Ink’s sales growth rate bolstered the arguments of E Ink shareholders who were unhappy with PVI’s original offer, and prompted the buyer to come back with the amended merger agreement.

“This is a creative win-win agreement for both PVI and E Ink,” said Scott Liu, chairman and CEO of PVI, in a statement. “PVI receives a more valuable company than we expected. E Ink investors will share in the future growth of the combined company, with no additional cash cost to PVI beyond the original agreement.”

The amended deal has garnered enough favor from major E Ink shareholders for the deal to be approved, according to PVI and E Ink. The deal, which must also be approved by PVI shareholders, is expected to close in the fourth quarter of 2009.

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