By Brian White Lernout & Hauspie Speech Products NV has made an unusual $59m acquisition of a mysterious Brussels-based company that provided it with an important revenue stream in recent years. Gaston Bastiaens, president and CEO of L&H, failed to respond to requests by Computergram over the past two days to explain the transaction and […]
By Brian White
Lernout & Hauspie Speech Products NV has made an unusual $59m acquisition of a mysterious Brussels-based company that provided it with an important revenue stream in recent years. Gaston Bastiaens, president and CEO of L&H, failed to respond to requests by Computergram over the past two days to explain the transaction and shed some light on the owners of the company at the center of the transaction, Brussels Translation Group (BTG).
In a deal agreed in 1997, BTG said it would pay L&H a total of $30m to develop internet translation services, now called iTranslator, in 14 language pairs. Payments were to be phased over two years as various development milestones were agreed.
L&H finished the work in 18 months. It was an important deal for the company at the time as, according to a document filed with the SEC, it accounted for 84% of the company’s language technologies revenue in 1997.
Under the terms of the deal, L&H agreed to pay BTG a percentage of net revenue from the commercial deployment of these services. Now L&H is paying $42m in cash and assuming $17m in debts to acquire all the stock in BTG. L&H expects the transaction to be dilutive for the current financial year and accretive in 2000.
L&H has sold iTranslator to a number of ISPs and sees enormous potential for the product as the rapid growth of internet users has led to increasing demands for translation of information in multiple languages. CEO Bastiaens said in a statement that, by purchasing BTG, the company would be able to tap into this growth opportunity and reap the full benefits of our development efforts.
The big question is why did L&H agree in the first place to develop and sell a core application with enormous potential to an outside company? And who are the mysterious shareholders of BTG who appear to have profited hugely from L&H’s expertise?
This is not the first deal of its kind L&H has entered into. In December 1996, it signed a $25m agreement with another private company, Dictation Consortium NV, to develop continuous dictation products. This research led to L&H’s Voice Express application for PC and products for vertical markets such as the medical sector.
Obligingly, Dictation Consortium agreed to be taken over by L&H in a $43.1m deal in June 1998. Whatever the reason for the deals, a major company such as L&H, quoted on both sides of the Atlantic, would appear to have more of an obligation to explain to investors the reason behind the transactions.