Riley Investment makes bid for Transmeta, blasts company's strategic direction

By Lisa Kerner

Charlotte, N.C., Jan. 31 - Riley Investment Management, LLC proposed the acquisition of all outstanding shares of Transmeta Corp. common stock not already owned by Riley or its affiliates for $15.50 per share in cash.

The per-share price is a 21% premium over Transmeta's closing price on Jan. 29, according to a schedule 13D filing with the Securities and Exchange Commission.

Riley said the $15.50-per-share price would provide liquidity to existing investors and return value to existing investors that Riley believes "would be wasted if management proceeds with its current strategy."

The investor, with a 7% ownership interest in the company, made its proposal to Transmeta in a Jan. 30 letter to the board and included in the SEC filing.

Conditions of the proposal include completion of satisfactory due diligence and the negotiation of mutually acceptable definitive agreements. Because the proposal would be primarily financed by the investor, the proposal is not conditioned on financing.

Previously, Riley had expressed concern over Transmeta's strategic direction and the "stewardship provided by both management and the board" in developing its LongRun2 technologies.

Riley also said Bryant Riley, its managing member, was treated poorly at the Jan. 15 board meeting, where his telephone call was recorded and the board "did nothing to assure the company's largest investor that his valid concerns and productive recommendations were acknowledged and would be taken into consideration."

In addition, Riley is filing a shareholder derivative lawsuit against Transmeta and its board members concerning recent bonus payments and option grants, as well as the company's refusal to provide requested information.

On Jan. 14, Riley asked for information to aid its investigation into "potential wrongdoing, mismanagement, waste of corporate assets and breaches of fiduciary duties" by members of Transmeta's board.

In December, Riley demanded it be allowed to designate four new board members to replace the board members who have held their position since the company's initial public offering, a prior SEC filing stated.

Santa Clara, Calif.-based Transmeta develops computing, microprocessor, semiconductor technologies and related intellectual property.

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