MagicJack VocalTec Ltd. (CALL) - Get Report agreed to sell itself to by B. Riley Financial Inc. (RILY) - Get Report for $143 million, or $8.71 a share, a major blow to rival bidder Carnegie Technologies Holdings LLC.
Shares of the free-calling application company shot up 47.8%, or by $2.70 a share, to $8.35 early Thursday, Nov. 9, on the news. B. Riley said its acquisition price represents a 23% premium over magicJack's 90-day average stock price. Shares of B. Riley, a Los Angeles financial services company, gained 0.9% to $16.05.
The companies said the magicJack business would be held by B. Riley Principal Investments, a unit that owns United Online Inc., a complementary telecom business. B. Riley plans to pay for the Netanya, Israel, and West Palm Beach, Fla., company with cash on hand and debt. The companies anticipated the deal would close in the first half of 2018.
"Investments such as this one are the key reason we formed our Principal Investments group," Bryant Riley, Chairman and CEO of B. Riley said in a statement. "We believe that magicJack is representative of the type of proprietary investment with attractive return characteristics that is often overlooked by others, but where we are uniquely qualified to leverage our balance sheet and comprehensive platform in order to maximize the investment potential."
The acquisition comes after Carnegie Technologies and its founder, Paul Posner, reportedly filed a lawsuit in February urging an Israeli court to change the agenda of magicJack's 2017 annual meeting to include a dissident slate of directors the rival firm wanted to elect.
Carnegie and Posner had begun a change-of-control proxy contest a month earlier to install five members who would take over magicJack's board and push for strategic alternatives such as a sale of the business.
The San Antonio, Texas, company said it also intended to submit a hostile bid of $8.50 a share to acquire magicJack. Carnegie Technologies previously has reported a 1.6% stake in MagicJack.
Posner said in a January statement that he took issue with the company's share price and strategic moves, noting that its stock value dropped with its acquisition of Broadsmart, a broadband- conference-service company. Posner called the purchase ill-conceived.
In March, he complained that magicJack refused to provide Carnegie with a basic list of shareholders and related information, which the firm needed for its proxy fight.
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