ANATOMY OF A TAKEOVER
Because the last two appointee's to Racom's board (i.e., Hinds and Bertman) share the common denominator of having served as Verifone Vice Presidents and because Hewlett Packard has recently taken over Verifone, I'll use Verifone's SEC filings to model an order of events of a takeover.
CONCERNING VERIFONE
11-03-96 HP and VeriFone Announce Strategic Alliance to Develop and Provide Internet-Payment Solutions.
verifone.com.
02-24-97 A Confidential Discloser Agreement between Verifone and Hewlett Packard is signed. Both sides agree not to disclose publicly the merger before consulting with the other. The signing of this agreement was not disclosed until 04-22-97 when Form 8-K was filed officially announcing the merger.
sec.gov
Around the time of the Confidential Agreement but before announcing the takeover appear a cluster of Form SC-13G filings - Statement of beneficial ownership. Specifically:
01-31-97 SC-13G/A2 Kopp Investment Advisors, 119,500 shrs
02-12-97 SG-13G Cybercash, 900,000 shrs
02-12-97 SC-13G JW Seligman, 1,33,500 shrs
03-19-97 SC-13G JW Seligman, 483,500 shrs (sold some)
04-07-97 SC-13G/A3 LeRoy Kopp 1,350,151 shrs (adds 3 other holdings)
sec.gov
03-26-97 - Indemnification made public. Form 10-K405 publish Bylaws as Amended through 03-15-97. This is the first mention in the SEC filings of Indemnification of Officers, Directors, Employees and Agents. I assume this was in the bylaws from the beginning but this was the first public mention of indemnification that I could find.
sec.gov
03-28-97 Form S-8 - Registration of 12,500 shrs from the 1997 Employee Phantom Stock Plan whereby the Compensation Committee has the exclusive power to select Employees to receive Restricted Phantom Stock Grants. Also, reiterates Indemnification of Directors and Officers
04-22-97 Form 8-K - Verifone and HP issued a joint press release relating to the execution of the Reorganization Agreement. Verifone enters into a definitive agreement to be acquired by Hewlett-Packard Company (HP).
05-12-97 Form 10Q - Each share of Verifone Common Stock was exchanged for one share of HP common stock. HP will issue approximately 23.3 million shares of HP common.
sec.gov
06/26/97 - CERTIFICATION AND NOTICE OF TERMINATION OF REGISTRATION
Approximately, 7 1/2 mo had expired from the time of the announced alliance to completions of the takeover of Verifone.
sec.gov
A lot of this maneuvering is what I call getting your ducks in order. Now, lets see if Racom has been getting its ducks in order.
CONCERNING RACOM
01-17-98 Form 8-K Racom announces the appointment of John A. Hinds to its board of directors #reply-5338507. (Note: in the proxy, Racom says Hinds came on board 12-18-97)
Could be routine, but we do have clustering of SC-13G filings - registration of beneficial ownership.
01-27-98 SG-13G, Intag, 5,422,532 shrs (listed 6/12/98)
02-12-98 SG-13G, Ramtron, 5,051,452 shrs
Both Ramtron and Intag publicly stake their claim in Racom by early February. Jointly, they own 79% of Racom. This is as good as any point in time to begin looking for the imprint of a Confidential Agreement in the public record; i.e., January/February of 1998.
sec.gov
OK, is there anything that suggests a change of course January/Feburary? Here's what the proxy says:
"OLIVER W. GATCHELL is the Company's Vice President of Alliances and Corporate Relations and is responsible for managing Racom alliance partners. Mr. Gatchell joined the company in January 1994 and managed European Sales and Distribution until 1998."
We know Oliver was in Europe in February 1998, he was probably wrapping things up #reply-3929585.
"CHARLES R. BROSHOUS, was the Company's Vice President for Transportation, until February 1998, and was responsible for managing the Company's transportation related Smart Card business, including its automated fare collection (AFC) systems for public transit."
"MICHAEL L. MALMER was the Company's Vice President of Engineering until November 1997 and was responsible for the engineering development of the Company's Smart Card products."
"WILLIAM H. JACOBS was the Company's Vice President of Business Development until February 1998 and was responsible for the development and marketing of new Smart Card products. "
The proxy indicates at least two important decisions were made in February that changed the course of Racom. One, they reduced their sales effort in Europe and began focusing on US markets. Also, there was a shift away from AFC with the leaving of Broshous.
sec.gov
Let's continue,
04-17-98 Form 8-K Racom announces the appointment of John A. Hinds as Chairman of the Board #reply-5338776.
05-15-98 Form 10QSB - Although I thought the 10Q lacked a philosophy and provided little hope for investors, it did have some information that for most part went unnoticed on the thread; e.g.,
1) Liability Insurance for Officers, to wit:
" The Company also recognized approximately $26,000 relating to the
Directors and Officers Liability Insurance policy which was not effective in First Quarter 1997 and was renewed in March 1998."
Note: This liability insurance provides some protection for officers and therefore is like the Indemnification we saw in Verifone's bylaws and was requested by Hinds. Granted this is just good business on Racom's part, but I wouldn't want to try a merger without some kind of liability protection.
2) Also, and probably more important, to wit:
"First Quarter 1998 also includes an increase in consulting and office expenses of approximately $57,000 due to increased audit fees, mergers & acquisitions research consulting and legal consulting expenses." Note: This may have been an expense associated with Racom Japan, but someone was doing some serious thinking about consolidation.
sec.gov
It appears Racom has followed a path towards merger. However, I expect we will see other events before we get the announcement. These include:
1) A revamped employee stock compensation plan,
2) Hinds going on as CEO as well as Chairman.
3) Development of new products compatible with Verifone's internet payment solutions.
4) An alliance agreement with Verifone/HP.
I wouldn't rule out some debt financing, but it will only come if Ramtron or Intag owe some favors.
Granted, Racom's time line is longer than Verifone's, but the event sequence is there. Concerning the time line, I suspect things are conditioned on Racom's ability to deliver the apple, a workable solution ready for the market place -- the 64K FRAM contactless multi-application smart card.
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