Barclays Capital analysts say that the settlement of a class action lawsuit against Comverse Technology Inc. (Pink Sheets: CMVT.PK) was better than expected, marks another milestone on Comverse's return as a listed company. Barclays expects that to be in early 2010.
The settlement was for $225 million , of which former CEO Kobi Alexander will pay $60 million. While the total amount was essentially in line with investor expectations, analysts Amir Rozwadowski and Jeff Kvaal say the structure allows Comverse to free up cash for near-term use.
Comverse will pay an upfront fee of $1M upon signing. Its first payment of $51.5 million is due in August of 2010, and its second and third payments are due in 2011.
Comverse intends to fund the first payment with par value auction rate securities which it has on hand. The second and third payments can be paid in cash or in stock at the company's election.
Barclays says that the deal is a positive step as it removes the potential for an unlimited liability which would have made it more difficult for Comverse to pursue what they called "strategic alternatives" after the completion of Comverse's filing process in Feb 2010.
The analysts add the settlement to moves by other Comverse units as they progress towards a return to listed trading in early 2010. "Ulticom completed its filing process and has been re-listed on the NASDAQ exchange. We continue to believe that Comverse, and Verint for that matter, are both likely to follow a similar strategy to their respective filing processes as Ulticom. Specifically, we anticipate both companies are likely to provide historical financials on a rolling basis potentially ahead of their target dates with the goal of being fully complete by their respective deadlines."
The analysts rate Comverse "Overweight" and give it a target price of $11. Comverse shares fell 0.5% in early trading to $9.40.
Published by Globes [online], Israel business news - www.globes-online.com - on December 21, 2009
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