Joff Wild

Initial expressions of interest in purchasing the 7,500-strong patent portfolio being offered for sale as part of the ongoing Qimonda bankruptcy process must be submitted by 5.00 pm Central European Time (4.00 pm GMT, 11.00 am EST) on 15th January 2013, according to documents seen by IAM. The deadline is set out in a letter to prospective purchasers prepared by a KPMG corporate finance team which is advising the vendors on the sale.

The letter also explains that “The Proposed Transaction foresees the disposal of Qimonda’s patent portfolio … as part of the sale of the QAG-Patent Business to one single purchaser” A break-up of the portfolio is not envisaged, the letter states, although “certain sub-portfolios, defined by the Vendor and each comprising a small number of functionally related patents, may be sold independently”. 

The letter sets out a number of points with which those wishing to submit a formal expression of interest have to comply:

(i) Description of the prospective purchaser – A detailed description of the prospective purchaser and general information on your ownership in patents similar to the Patent Portfolio;

(ii) Acting as principal – Confirmation that you are acting as principal for your own account and not as a broker or agent for an undisclosed third party;

(iii) Scope of interest – An explanation of whether you are interested in acquiring the QAG-Patent Business in its entirety or whether you are interested in acquiring only one or more of the defined sub-portfolios as briefly described in the teaser document (“Teaser“) provided to you;

(iv)  Availability of financing – An assurance of the necessary financing available to fund the Proposed Transaction;

(v) Assumptions – An explanation of the assumptions you are making at this stage, if any, in contemplating the investment opportunity and delivering your Expression of Interest;

(vi) Due diligence – A description of the due diligence items that you wish to analyse in  order to make a concrete investment proposal with a final and binding offer price for the QAG-Patent Business; 

(vii) Contacts – The identity and details of your advisors, if any, and the name(s) of the principal contacts with whom KPMG Corporate Finance may clarify any issues with respect to the Expression of Interest;

(viii) Other information – Any other information which you deem to be material to the Vendor in the decision to select parties admitted to the next phase of the Sales Process.

Parties will have to decide whether they wish to submit an expression of interest can do so only on the basis of the so-called Teaser document (which we exclusively revealed a few weeks ago), as well as, presumably, any research they undertake themselves. But those invited to proceed to the next stage will receive more to work on:

Should you be invited to the next phase of the Sales Process, you will be given access to a confidential information memorandum that gives a detailed overview on the QAG-Patent Business as well as to a list of the patent families comprising the Patent Portfolio classified by region (US, EPED, Germany, others) and showing, inter alia, the patent number, title, abstract description of the covered technology and claims. This will enable you to make an indicative offer including, but not limited to, a non-binding indication of the purchase price expressed in Euro for the QAG-Patent Business you are offering and the envisaged transaction structure (“Indicative Offer”). Further details will be communicated in due course in the form of a second process letter after consideration of the Expressions of Interest by the Vendor. 

A data room due diligence will take place for parties who, in the sole judgement of the Vendor, have submitted an Indicative Offer sufficiently attractive to the Vendor. Please note that access to certain due diligence items may be limited to outside counsel or advisors and/or may be made subject to entering into an additional confidentiality agreement.

What the letter does not say is how the final deal, if there is one, will be done: will it be sealed bids, an auction, a series of independent negotiations, or what? In order to maximise the price, though, the KPMG team is going to have to give that some serious thought, if they have not done so already. And given the recent IV/RPX hook-up to secure the Kodak portfolio, not to mention AST’s facilitation of the purchase of the MIPs portfolio by an ARM-led consortium, they are also going to have to be very wary of potential purchasers working together in order to keep the price as low as possible. Bottom line, I suppose, is that you have anything to do with Qimonda as a creditor or investor you are going to have to hope that the KPMG team has a good understanding of the dynamics that underpin patent sales, as well as a roster of world class advisers with experience of how things work.