Proshares Ultrashort Telecommunications (AMEX:TLL)
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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.