Sunday, January 4, 2009

Selectica Inc. Pulls Trigger on Poison Pill

Selectica Inc. SLTC issued a press release on Saturday evening announcing that a Special Committee of the Board has ordered the exchange of each outstanding right under its Rights Agreement (aka the "Poison Pill"), as in effect as of the close of business on January 2, 2009, for one share of the Company’s common stock. Click here for the press release.

The exchange will double the number of shares of Selectica common stock owned by each stockholder of record as of the close of business on January 2, 2009, other than Versata Enterprises Inc., a subsidiary of Trilogy, Inc who has been accumulating stock above the Pill level.

Activist investor Steel Partners owns 12.5% of SLTC.

On November 14th Versata Enterprises, a subsidiary of Trilogy, Inc., acquired 5.1% of the Company and made a verbal proposal to acquire the Company. (The details of the proposal have not yet been made public)

Reducing the Pill
On November 17th SLTC reduced the trigger on their poison pill from 15% to 4.99% purportedly to protect the value of their tax loss carry-forward benefits. (As of March 31st 2008 SLTC had federal and state net operating loss tax carry-forward assets equivalent to approximately $250M)

Ignoring the Pill
On December 18th and 19th Versata purchased an additional 154,051 shares of SLTC’s stock, bringing their ownership to 6.7%.

Triggering the Pill
On December 22nd Versata received a complaint (Selectica, Inc. vs. Versata Enterprises, Inc. and Trilogy, Inc., filed in the Court of Chancery of the State of Delaware on December 21, 2008) from Selectica seeking a declaratory judgment as to the validity of the Rights Agreement.

Selectica is currently trading around $0.88/share. As of October 31st 2008 the Company had $1.06/share in cash and short term investments.

Posted by Damien Park, Hedge Fund Solutions