Patent licensing company WiLAN Inc. announced an agreement to acquire intelligent transport firm International Road Dynamics (IRD) for $47.4 million in cash, announced an executive reshuffle and unveiled major plans to change its name to Quarterhill Inc and transform its business strategy.
WiLAN said it plans to change its business into a “growth-oriented diversified holding company by acquiring businesses that will operate alongside the company’s intellectual property licensing business.”
It said it concluded that patent licensing as a stand-alone business will not meet its long-term objectives as a public company.
Acquired businesses will operate independently as subsidiaries of Quarterhill and WiLAN will continue as a subsidiary of Quarterhill focusing on patent licensing.
WiLAN said it will change its name to Quarterhill on or about June 1, 2017 and, effective immediately, implement the following management changes: chairman Paul McCarten becomes independent lead director; CEO James Skippen becomes executive chairman; CFO Shaun McEwan becomes interim CEO; and Steve Thompson, VP Finance, becomes interim CFO.
The WiLAN board has begun a search for a full time CEO.
“Quarterhill’s growth strategy will focus on acquiring technology companies in the Industrial Internet of Things segment across multiple verticals,” said WiLAN.
“The acquisition strategy will target companies with a broad range of products and services that capture, analyze and interpret data, and that have strong financial performance, excellent management teams, strong intellectual property underpinnings and significant opportunities to develop long-term recurring and growing revenue streams.”
Skippen said: “Over the past several years we have considered multiple options for how to best leverage our capital to grow the business and increase shareholder value.
“This strategy provides an ideal opportunity for us to diversify and inject new growth into the business, while addressing the ‘lumpy’ financial performance that has come to be associated with stand-alone patent licensing businesses.
“Because the environment for patent licensing companies has changed so much over the past decade, we have concluded that patent licensing as a stand-alone business will not meet our long-term objectives as a public company.
“However, the knowledge and experience we have gained as a leader in the patent licensing industry are directly applicable to identifying promising technology businesses with a focus on the IIoT segment.
“We will be looking for opportunities to expand our board and senior management team with additional M&A and IIoT experience.
“WiLAN has a very strong established brand in the intellectual property licensing industry, which we will continue to build on.”
Skippen said for the year ended December 31, 2016, WiLAN generated revenues of $92.9 million, earnings before interest, taxes, depreciation and amortization of $53.7 million and cash from operations of $36.8 million.
Skippen added: “The future focus will be on generating positive cash flow and consistent performance from the patent business.
“In my new role as executive chairman I will oversee the strategic direction and chair the board of Quarterhill.
“I will also oversee operations in the patent licensing part of the business on a temporary basis while we seek a permanent leader of this important part of our business.
“It is expected that even after we appoint a permanent leader of the patent licensing business, I will continue to assist on a part-time basis with patent licensing operations.
“This fits with my own personal plans and allows an evolution in the leadership of the company.”
The purchase price for IRD represents a 51% premium to IRD’s closing price on April 13 and a 35% premium to its 90-day volume-weighted average trading price.
IRD is an Industrial Internet of Things (IIoT) company specializing in Intelligent Transportation Systems (ITS) and producing a portfolio of integrated hardware and software products.
IRD’s systems detect vehicles and analyze traffic data to help highway agencies protect infrastructure, enhance safety and optimize highway design.