Parthus lost 13 per cent of its market value yesterday as investors continued to doubt the merits of its proposed merger with the intellectual property licensing arm of US-Israeli firm, DSP Group.
The Dublin-based high-tech firm, which develops IP for wireless devices, has shed more than 40 per cent of its value following the announcement of the merger with DSP Group on April 5th.
Shares in Parthus fell a further four pence sterling (€0.65) yesterday to close at 26.5 pence on the London Stock Exchange. This values the firm at just £153 million, compared with a market value of £260 million achieved when Parthus hit an April high of 45 pence a share.
In contrast, DSP Group - which will demerge its IP licensing arm to join with Parthus - has seen its share price increase by 10 per cent since the deal was announced.
Analysts said the fall-off in Parthus's value signified a lack of market support for the firm's merger plans, but most said the deal would probably go through.
"The market is voting with its feet," said Mr Sean Murphy, a semiconductor analyst with Nomura. "They are saying which side of the deal they prefer." He said the decline in the Parthus share price also reflected a pronounced fall-off in sentiment towards small unprofitable technology stocks in recent weeks.
Analysts from Merrion Stockbrokers and Davy Stockbrokers said Parthus's steep share price decline was linked to poor results from its larger peer, ARM.
Mr John Coolican of Merrion Stockbrokers said the case for renegotiation of the merger was small as there was no ceiling or floors put in place to enable one side to walk away from the deal.
But he said management at the firms would have a fiduciary duty to shareholders to maximise the value of their holdings.
Mr Paul Phelan of Davy Stockbrokers said the complicated nature of the deal may have impacted on sentiment. But it was a good deal for both firms in terms of long-term strategy.
A Parthus spokesman said the merger was a long-term strategy deal and was not affected in any way by short-term price fluctuations. The firm had received 36 per cent irrevocable support from shareholders and there was no set share price at which either party could exit the deal, he added.
Likewise, DSP Group added its support to the planned merger yesterday stating that it was confident it would go ahead. A DSP Group spokesman said it was looking more at business issues rather than the market which was very weak.
The deal prospectus outlining the full terms of the planned merger between the two firms is expected to be ready by mid-May. Earlier this month both companies said they would create a merger of equals between Parthus and the IP licensing arm of the DSP Group.
DSP shareholders will own 50.1 per cent of the combined company, which would be named ParthusCeva. Parthus shareholders would own the rest and receive a cash payment worth $60 million (€66.5 million) as a capital repayment. If the Parthus share price does not recover before the merger goes ahead, the new company would have market capitalisation of about $300 million. It would have cash balances worth about $85 million.
