Merger with Matridigm:
biz.yahoo.com
FreeEdgar 8-K:
freeedgar.com
Conference call at 10:30AM EDT today, at:
vcall.com
One share of "New Matridigm" for every Zitel share. 0.65 share of "New Matridigm" for every existing Matridigm share.
<<Following the consummation of the transaction, the current shareholders of Zitel and MatriDigm will own approximately 55.5% and 44.5%, respectively, of the new Company.>
Since Zitel's current market cap is 54.4M (at a stock price of $3-1/16), the math is pretty easy: the market cap of the combined entity will be $100M. If you uncharitably view Matridigm as worthless, you might look upon this as a 44.5% dilution of Zitel ;-)
Long, long ago the shorts said that Zitel and Matridigm would never merge, because that would force disclosure of Matridigm's financials, and the jig would be up. Well those darn shorties were wrong! ;-) Now we finally will get a peek at what is going on at Matridigm. The press release includes this: <<For the nine months ended June 30, 1998, the company recorded revenues of $3.8 million and a net loss of $10.8 million (unaudited).>
Hmmm, $3.8M, perhaps they've made enough progress on the Nevada contract that they're finally able to recognize some revenue? I (cynically) wonder what their cash-flow statement will look like.
According to Yahoo!'s profile for Zitel, <<For the nine months ended 6/30/98, revenues increased 51% to $17.7 million.>>
Pro-forma 9-mos. revenue for New Matridigm would therefore be $21.5M. At a market cap of $100M, the P/S will be even worse for New Matridigm than is was for Zitel.
IMHO, Zitel may be overpaying for Matridigm. Before this merger, they already owned approx 30% of Matridigm. For the other 70%, they are giving the existing Matridigm owners 44.5% of the new company - almost $45M in stock. This implicitly values Matridigm at over $60 million.
Therefore Zitel may now be an even better short today than it was yesterday (!)
- Daniel |
