DULUTH, GA.: Wegener Corp. today announced the cancellation of its letter of intent with Sencore of Sioux Falls, S.D. Sencore and Wegener had signed a non-binding letter of intent to acquire Wegener in July. The letter indicated Sencore would take all of Wegener’s (NASDAQ: WGNR) outstanding shares of common stock for cash consideration of $6 million. Wegener said the letter expired Sept. 13, that its board had “terminated” the document, and that Sencore was notified on Thursday.
Wegener, which distributes content via satellite, said it received an amendment from its senior lender, extending its line of credit to fund operations until the Sencore deal closed. That amendment came through Wednesday, Wegener said, but was contingent on it being acquired by Oct. 15.
“The amendment is subject to the execution of a merger agreement or asset purchase agreement, which is satisfactory to the bank, between Wegener Corp. and a third party by Oct. 15, 2009,” Wegener said. “Failure to satisfy this condition would constitute an event of default under the line of credit agreement, unless the bank otherwise waives the condition, which it is not obligated to do.”
“The amendment extends the term of the line of credit agreement through Nov. 30, 2009, and allows for over advances up to $500,000 beyond the agreed upon collateral formula, which is primarily based on eligible accounts receivable and inventory.”
These advances–up to $4 million total at 2 percent above the bank’s prime rate–are contingent on a merger or asset purchase agreement executed by Oct. 15.
“Because the amendment was premised on the possibility of a merger between Wegener Corp. and Sencore, and given the termination of the letter of intent with Sencore, Wegener is now in discussions with the bank regarding how to move forward on a path to financial stability for the company,” Wegener said. “There can be no assurance that Wegener will reach agreement with the bank in these discussions or that it, in accordance with the amendment, will successfully enter into a merger or asset purchase agreement with a third party by Oct. 15, 2009 or that any such agreement, even if executed, will be satisfactory to the bank.
“Wegener Corp. is not at present in discussions with Sencore, or any other third parties regarding a merger or asset purchase agreement, although it may continue to pursue such a transaction.”