RPX has been the subject of a recent takeover offer from a private consortium which values the defensive aggregator at around $800 million, according to two sources with knowledge of the offer. IAM understands that the firm’s board has yet to respond, although with a bid of $16.25 per share, a significant increase on the current price of around $12.80, shareholders might be tempted to back a sale. When asked for a comment a spokesperson for RPX responded that they didn’t comment on rumours.
As this blog reported earlier this year, bid interest in RPX has mounted ever since former CEO and co-founder John Amster exited the business in February. Amster had been lobbying the board to consider taking the company private as the share price languished below $11, well off its $19 a share IPO price in 2011.
In the months following Amster’s departure RPX’s share price rose closer to $14 per share which, as we pointed out in May, made it unlikely that shareholders would accept an offer unless it was at a premium that many prospective bidders would be unlikely to pay. Observers have speculated that it would take an offer of more than $16 to make a deal happen, although the fact that the board is yet to respond to the latest approach suggests that they may be holding out for more.
While it sits on a very healthy pile of cash and enjoys a status as one of the iconic brands in the IP market, RPX has struggled to find new opportunities to assuage investors’ concerns over its long-term growth potential.
In 2016 the company’s leadership was thrust into the spotlight when activist investor Mangrove Capital Partners wrote an excoriating letter to RPX’s board criticising management and calling for significant cost-cutting measures. Mangrove’s letter also referred to RPX’s 2015 acquisition of discovery management business Inventus Solutions for $232 million as a “costly mistake”. At the time of RPX’s offer, Inventus was the subject of private equity interest and some critics privately contend that the patent business paid too much. That might mean that any successful bidder would look to quickly dispose of the Inventus business to free up some cash to pay down acquisition debt.
However, there is no doubt that RPX does sit on a portfolio of valuable rights. Despite the encumbrances that come with a large client-base, the firm is thought to have very few Chinese members (although China may become a focus for growth); while the rise of the Internet of Things means that a number of companies that even just a few years ago might not have thought they were on the radar of an entity that majors on areas such as mobile communications, semiconductors, networking, e-commerce and software all of a sudden now are. If RPX covenants allow it, a buyer might decide that defensive aggregation is no longer as interesting as the possibility for some serious monetisation with the assets that come with a purchase.