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Do Canadian Tech Stocks Deserve a “Takeover Premium”?

Siemens Canada's offer for Ruggedcom was a premium of 142% to the closing price of RuggedCom shares on December 16, 2011, which was the last trading day before shunned suitor Belden expressed interest. Belden finally landed a Canadian tech, Miranda, at $17 a share, which was a 64 % premium to that stock's closing price of $10.39 on June 4th.

Siemens Canada’s offer for Ruggedcom was a premium of 142% to the closing price of RuggedCom shares on December 16, 2011, which was the last trading day before shunned suitor Belden expressed interest. Belden finally landed a Canadian tech, Miranda, at $17 a share, which was a 64 % premium to that stock’s closing price of $10.39 on June 4th. As we have talked about several times here at Cantech Letter, the defining story of recent months in Canadian tech is the buyouts of many of our best and brightest firms.

The Branham Group reported that last year, forty-five Canadian tech firms were acquired by foreign buyers. Many notable TSX listed companies, including Zarlink, Bridgewater, Ruggedcom, Mosaid, Gennum and Miranda Technologies have been bought out.

Yesterday, two stories we covered here were the buyout of Quebec’s 20-20 Technologies by San Francisco-based private equity firm Vector Capital and Western Wind Energy, which is putting itself on the block.

It seems that many US concerns are seeing what Byron Berry of Byron Capital saw earlier this year; Canadian techs are trading at a significant discount to their US peers, even though they actually have better earnings.

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This story is brought to you by Serenic (TSXV:SER). Serenic’s cash position as of May 31st, 2012, $4.45-million, was greater than its market cap as of July 23rd, which was $3.64-million. The company has zero long-term debt. Click here for more info.

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A quick look at the takeover premiums of various recent deals illustrates this. Microsemi paid $3.86 a share for Zarlink, a 67% premium over the closing price of the shares the day before the offer. Siemens Canada’s offer for Ruggedcom was a premium of 142% to the closing price of that company’s shares on December 16, 2011, which was the last trading day before shunned suitor Belden expressed interest. Semtech paid $13.55 a share for Gennum. That stock had closed at $6.15 the day before. Belden finally landed a Canadian tech, Miranda, at $17 a share; a 64 % premium to the stock’s closing price of $10.39 on June 4th.

With a decade-plus long run in commodities sputtering, are these premiums the kick in the pants necessary to shake awake the long suffering Canadian tech sector? You tell us in our poll..

[polldaddy poll=6428814]

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About The Author /

Nick Waddell
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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