Friday, an investor group comprising Riley Investment Management Llc, certain of its affiliates, and Lloyd Miller said that it delivered a letter to the independent members of the Board of WPCS International Inc (WPCS: Quote) urging the special committee of the company's Board to convene a meeting with the investor group by September 27 to discuss its proposed cash and stock, or all cash, acquisition of WPCS by Telecom Global Inc., for a price of $3.50 per share.
Riley investment Management, certain of its affiliates and Lloyd Miller collectively own about 10.2% of the outstanding shares of Pennsylvania-based WPCS, an engineering services company. The investor group controls Telecom Global, an engineering company with over 2,100 employees and $200 million in annual revenues.
In the letter to WPCS International's Independent Board Members, the investor group expressed dismay that the Board and management of the company had rebuffed the acquisition proposal, terming it inadequate. The investor group on August 27 had sent a letter detailing synergies the combined company would realize and the benefits that would ensue.
The investor group noted that plans by WPCS to seek other strategic alternatives was only a ploy to stall the acquisition process.
WPCS International recently announced net loss for the first quarter from a profit last year despite increased revenues, hurt by higher selling costs and a one time acquisition related expense. The company's net loss was $376 thousand or $0.05 per share compared to net income of $435 thousand or $0.06 per share last year. Revenues, though, rose 14% to $28.9 million from $25.3 million.
Further in the letter, the investor group said that the company's stock price has plummeted over 81%, and termed the management's expectations of a turnaround to be imprudent, given that projections for fiscal 2009 and 2010 did not fructify.
The investor group deplored the Board's rewarding of Chief Executive Officer Andy Hidalgo and Chief Financial Officer Joe Heater with five-year employment agreements despite mediocre operating results. Also the group said that the Board's adoption of a poison pill wasn't in the interests of the stockholders and urged the Board to revoke it.
The investor group also cautioned that the deteriorating operating results would erode the company's value and would compel it to reconsider its proposal. The letter also warned that it would withdraw the proposal if a meeting is not held by September 27. and that the investor group would take suitable measures to protect shareholders.
WPCS is currently trading at $3.10, up $0.02 or 0.65%, on the Nasdaq.
by RTT Staff Writer
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