Teletouch Agrees to Sell Paging Business to Private Investment Group for $5.2 Million
25 August 2005 - 12:30AM
Business Wire
Teletouch Communications, Inc. (AMEX:TLL) announced today that on
August 22, 2005, TLL entered into an Asset Purchase Agreement
("APA") with Teletouch Paging, LP, a newly formed limited
partnership, wholly-owned by a private Fort Worth, Texas,
investment group (the "Buyer"), to sell all of TLL's paging
business assets and operations. The agreed purchase price is $5.2
million. The closing of the transaction is subject to final
approval by TLL's board of directors, shareholders and federal
regulators, as well as customary closing conditions, and is
expected to close by September 30, 2005. The Company has evaluated
TLL's future business direction, its ability to continue to operate
as a going concern and the estimated value of its paging and
two-way radio business units. Based on that analysis, the Company
has determined that it is in the shareholders' best interests to
divest TLL's paging business in its entirety through an asset sale
transaction. A special committee of the Company's independent Board
of Directors has hired an independent valuation advisory firm,
Houston, Texas-based Howard Frazier Barker Elliot, Inc. ("HFBE"),
to provide assistance and guidance to the Board for the purposes of
completing an independent evaluation of the sale of the paging and
two-way radio business units and render an opinion as to the
transaction's fairness to the Company's shareholders from a
financial point of view. The Board's approval to close this
transaction is subject to the final results of the independent
Fairness Opinion, with the results and presentation to be provided
to the Board by HFBE on August 26, 2005. T. A. "Kip" Hyde, Jr., CEO
of Teletouch, stated, "This strategic move will significantly
increase Teletouch's cash position and will allow the company to
concentrate its technology development and sales efforts in the
emerging Homeland Security, Telematics and related GPS
Location-Based Services markets, which are expected to grow to over
$50 billion by 2010, according to Gartner, BCCI, UBS Warburg and
other published reports. Further, this action will allow Teletouch
to add more focus and sales resources to our Homeland
Security-related and commercial two-way radio marketing efforts.
"In addition, this decision eliminates the uncertainty and going
concern issues that have surrounded the decline of our paging
business, a consequence of the declining paging industry in
general. This uncertainty has been a primary concern of potential
lenders and investors, and has severely limited us from entering
into new financing relationships that would improve our growth and
position in the marketplace. Ultimately, we believe that the cash
generated as a result of this asset sale will considerably enhance
Teletouch's long-term value by providing needed working capital for
potential acquisitions and faster internal growth. Hyde continued,
"We plan to fully leverage the GPS-based mobile asset tracking
applications we've developed for upcoming Department of Homeland
Security directed initiatives for hazardous materials tracking in
the railroad industry, and through sales of our proprietary
Lifeguard II(TM) technology for "at-risk" and "lone" worker life
safety monitoring and locating. Both of these markets show great
promise, and our preliminary sales and indications of interest are
strong. Hyde concluded, "Divesting paging will allow greater
visibility to the successes of our new business efforts. For
example, as reported in our prior quarterly filings, our two-way
radio segment is on track to nearly double over the last fiscal
year, primarily as a result of the large increases in Homeland
Security funding for new radio equipment and services and last
year's acquisition of Delta Communications operations. In addition,
we have sold and installed over a thousand GPS tracking units to
date, and recently signed a comprehensive call center services
agreement to provide stolen vehicle location services for fast
growing Guidepoint Systems. We will continue these efforts, with
the increased financial capability of hiring additional sales
people, completing proprietary product development and potentially
acquiring new spectrum, operations and related businesses."
Evaluation Process Management began the evaluation process which
led to the disposition decision in June 2005, after the company was
unable to obtain additional financing, due to its financial
condition, the going concern opinion expressed by the Company in
its public filings and the uncertainty created by the continuous
decline in its core paging business. TLL's management examined the
markets in which the paging business operates to assess potential
growth, sale, merger and acquisition opportunities. Throughout this
process, the Company directly contacted a number of potential
strategic buyers, with no interest being shown. Having assessed the
limited market opportunities, negotiated unsuccessfully with
potential acquisition targets and reviewed management's
recommendation, the Company determined that the asset disposition
transaction was in the best interests of TLL's stockholders. The
Proposed Transaction The asset sale transaction includes
substantially all of the assets of the Company's paging business
segment (the "Acquired Assets") as reported in its Quarterly Report
on Form 10-Q for the quarter ended February 28, 2005. The
consideration for the Acquired Assets and operations is $5.2
million, plus the assumption of certain paging related liabilities.
At Closing, the Company will receive $4 million in cash plus $1.2
million in the form of a non-interest bearing promissory note, with
twelve equal monthly payments to begin March 1, 2007. The Company
believes that it will collect the full value of the purchase price.
The closing is subject to TLL Board, shareholder and regulatory
approvals. The transaction is expected to close by September 30,
2005. A Special Committee of the Board of Directors of TLL has
retained Howard Frazier Barker Elliot, Inc. ("HFBE") to render an
opinion with respect to the fairness, from a financial point of
view, of the consideration to be received in connection with the
contemplated sale of the paging business. The opinions to be
presented to, and reviewed by, the Special Committee however, will
not address TLL's underlying business decision to effect the
proposed transaction, but rather, are opinions as to a
determination that the consideration received by TLL for the
transaction is fair to the common stockholders (other than its
Chairman and largest shareholder) from a financial point of view.
The foregoing is a summary description of the terms of the APA, and
by its nature is incomplete. It is qualified in the entirety by the
text of the APA, a copy of which will be filed as an exhibit to a
Current Report on Form 8-K, expected to be filed within the
timeframe prescribed by the federal securities laws. All readers of
this press release are strongly encouraged to read the entire text
of the APA. Management Services Agreement The parties have also
agreed to enter into a Management Services Agreement ("MSA") on, or
before August 31, 2005, to facilitate a smooth transition of the
paging business operations from TLL to the Buyer. In the MSA, the
Buyer shall have authority, on a limited basis consistent with the
effective regulations of the FCC, to implement operational policies
and to provide general management services with respect to the
day-to-day operations of TLL's paging operations, subject to
reporting to and approval of the President of TLL and its Board. As
its compensation for the management services provided under the
MSA, the Buyer shall be entitled to a flat fee of $50,000 per month
during the period before the closing date, payable in two equal
installments per month, beginning September 2, and 16, 2005,
respectively. The term of the MSA will be from September 1, 2005 to
the earlier of: (i) the APA final closing date, or (ii) the
termination of the APA. The foregoing is a summary description of
the general terms of the MSA and by its nature is incomplete. It is
qualified in its entirety by the text of the MSA, a copy of which
will be filed as an exhibit to a Current Report on Form 8-K,
expected to be filed within the timeframe prescribed by the federal
securities laws. All readers of this press release are strongly
encouraged to read the entire text of the MSA. Progressive Concepts
Communications, Inc. Due to an inability to reach agreement on
mutually acceptable revised terms and conditions related to the
originally proposed transaction and non-binding letter of intent
with Progressive Concepts Communications, Inc. ("PCCI"), and TLL's
subsequent inability to attract the debt or equity financing
necessary to close on the new terms and conditions proposed by
PCCI's Board, TLL and PCCI have agreed not to proceed with the
proposed transaction that was previously announced by the companies
on October 26, 2004. About Howard Frazier Barker Elliot, Inc.
Founded in 1991, HFBE is an investment banking, business valuation
and financial advisory firm providing a range of financial services
to both public and private businesses in a wide range of
industries. In addition to fairness opinions and valuations, HFBE
also provides merger and acquisition advisory services, real estate
financing, private placements of debt and equity, senior debt
financing, litigation support and general financial advisory
services. HFBE has 27 professionals with offices in Houston and
Dallas. About Teletouch Teletouch Communications, Inc., a proven
U.S. leader in wireless messaging and related network management,
provides a complete suite of mobile asset tracking solutions using
sophisticated, yet cost-effective GPS-based hardware and software
products for fleets, hazardous materials and "worker-down"
emergency notification applications. In addition to its telemetry
business, Teletouch offers two-way radio communications, cellular
and wireless messaging services throughout the United States.
Teletouch's common stock is traded on the American Stock Exchange
under stock symbol: TLL. Additional product, business and financial
information for Teletouch is available at www.Teletouch.com. This
release contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Exchange Act, as amended, that are based on
management's exercise of business judgment as well as assumptions
made by and information currently available to management. When
used in this document, the words "may", "will", "anticipate",
"believe", "estimate", "expect", "intend", and words of similar
import, are intended to identify any forward-looking statements.
You should not place undue reliance on these forward-looking
statements. Negotiations with respect to the transaction that are
the subject of this release are ongoing and may result in
significant modifications to the transaction. There can be no
assurance that the transaction that is the focus of this release
will be concluded, or if concluded that it will be concluded on
terms currently contemplated. These statements reflect our current
view of future events and are subject to certain risks and
uncertainties as noted in our securities and other regulatory
filings. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, our
actual results could differ materially from those anticipated in
these forward-looking statements. We undertake no obligation and do
not intend to update, revise or otherwise publicly release any
revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
any unanticipated events. Although we believe that our expectations
are based on reasonable assumptions, we can give no assurance that
our expectations will materialize. Many factors could cause actual
results to differ materially from our forward-looking statements.
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