It has become clear that Hummingbird’s chairman Fred Sorkin and his band of board cronies are doing their utmost to facilitate the sale of their Toronto-based content-management software company to Symphony Technology Group rather than to Open Text Corporation of nearby Waterloo, Ontario. Even though Open Text has unofficially proposed to acquire rival Hummingbird for $483.4 million in cash, a bid 3.7 percent higher (or about $17-millon more) than the original offer from Symphony, Hummingbird’s board continues to recommend shareholders approve the sale to Symphony until Open Text submits a formal bid.
But let’s do the math on this one. Even with the dubious 2.5-percent breakup fee agreed between Hummingbird and Symphony, which means the California concern could walk away with $12 million as compensation for an aborted union, the Open Text bid still surpasses the Symphony proposal by $5 million. That’s not a lot, but it’s a premium nonetheless. What’s more, a case could be made that Open Text would emerge a stronger player in the market, and represent a better vehicle for Hummingbird investors, than would Symphony, which would run Hummingbird pretty much as it is being run today, though with more Silicon Valley connections than it has enjoyed previously.
It looks as though Sorkin is trying to push through the Symphony offer, even though he and his board say they would negotiate a deal with Open Text if its offer were for “substantially more” than the $27.75 per share that Open Text has cited. Sorkin wants the significantly higher amount because of supposed risks associated with abrogating the impending deal with Symphony, even though, as our back-of-the-envelope calculations already show, the Open Text bid is financially superior even when we take the negotiated breakup fee with Symphony into account.
What’s up here, Fred? Are you trying to squeeze more money from Open Text, working for greater shareholder value, or are other factors at play?