MathStar Ongoing Deal Saga Gets Curiouser and Curiouser

Jul.21.09 | About: Sajan, Inc. (SAJA)

As the tender offer for MathStar (NYSEARCA:MATH) runs into its final hours, there’s a new twist in the already-twisted saga around this Pink Sheets-listed company. First, a bit of a recap. In early June, hedge fund Tiberius Capital tossed out an unsolicited bid of $1.15 for each share of MathStar, which has been exploring ’strategic alternatives’ for more than a year. MathStar’s board rejected the initial overture, as it did when Tiberius sweetened the offer earlier this month to $1.25 per share, for a total of $11.5m. When it bumped the bid, Tiberius also said the tender offer expires late tonight. (Of course, it could extend the deadline, as often happens in these cases.)

At this point, however, the deal gets ‘curiouser and curiouser’ (as Alice said when she found herself in Wonderland). We noted late last week that rather than be a seller, MathStar is now planning to be a buyer. The erstwhile fabless semiconductor firm announced that it plans to acquire language-translation vendor Sajan. As expected, the news didn’t go over well with Tiberius, which is also MathStar’s largest shareholder. But the planned purchase also didn’t sit well with the company’s founder and longtime chief executive, Douglas Pihl, who quit in protest.

Given such a vote of no confidence, we looked more closely into MathStar’s proposed buy of Sajan. Although investment bank Craig-Hallum Capital Group is listed as the adviser for MathStar on the deal, we discovered that the transaction actually flows through a different Minneapolis-based investment bank, Feltl and Company.

Not disclosed anywhere publicly is the fact that Feltl has actually worked on deals for both sides of the proposed acquisition, serving as manager for two MathStar offerings over the past three years, and having done placements for the firm before that. Feltl also advised on a placement for Sajan in January 2007.

We’re not suggesting anything nefarious about the proposed MathStar-Sajan transaction. But we sought to clarify how it came to be that a vendor with a decade of business in the semiconductor industry came up with the idea – along with Feltl as well as its lawyers and bankers – to use half of its cash holdings to buy its way into a completely different field. No one returned calls.