Buddy Ken Camp caught the news yesterday that CounterPath is acquiring NewHeights Software. For those not in the know, NewHeights is the creator of some very innovative desktop software that extends the PBX feature set onto the PC desktop. With NewHeights products you can control virtually all aspects of any kind of conversation from a nice drag and drop interface. It's quite interesting to see a CounterPath, a softphone company, merge with NewHeights.
Even more interesting, perhaps, were the fiscal details of the transaction. Terry Matthews becomes Chairman of the Board, and:
CounterPath will acquire all of the shares of NewHeights through the issuance of 40,250,000 shares of CounterPath’s common stock to shareholders of NewHeights (NewHeights shareholders who are Canadian residents may, in lieu of receiving shares of CounterPath common stock, elect to receive shares exchangeable into CounterPath shares in order to defer taxable income or gains). Immediately prior to closing, NewHeights will be debt free and have $2.5 million in cash to contribute to the combined entities. Wesley Clover has irrevocably committed a further $3.5 million to be invested over a seven month period for 8,750,000 shares of common stock bringing the total cash contribution to CounterPath by NewHeights and Wesley Clover to $6 million. Upon closing, CounterPath’s convertible debenture holders have agreed to convert their existing debentures in the amount of $4 million and invest a further $2 million for 15,000,000 shares of common stock at $0.40 per share.
At closing, CounterPath expects to be debt free, and have an additional $8 million of new cash or cash commitments. Following the investments of the convertible debenture holders and Wesley Clover, CounterPath expects that there will be a total of 101,940,983 shares of common stock outstanding (including shares exchangeable into CounterPath shares). The closing of the transaction contemplated by the definitive agreement is subject to various conditions, including approval by NewHeights’ securityholders, court approval and other customary closing conditions. The transaction is expected to close within 60 days.
Hmmm… 102 million shares outstanding at the end, of which 49 million are owned by the shareholders of NewHeights (and I am presuming that Matthews and his holding company Wesley Clover are the majority of those), and the remainder owned publicly and by the debenture holders of CounterPath. What's really happened here is that Matthews has found a way to vend NewHeights into a publicly entity, which he now controls, without having to go through the expense of an IPO.