Merger with Sajan spells end of the line for MathStar

MathStar Inc., a former Minnesota tech start-up at the center of a securities fraud lawsuit, is buying Sajan Inc. in River Falls, Wis., for an estimated $16.2 million.

The deal is expected to close by March. MathStar will buy Sajan with $6.1 million cash, about $9.1 million in stock and a $1 million loan, according to a filing Tuesday with the Securities and Exchange Commission. The company will operate as Sajan going forward.

The merger appears to be the end of the road for MathStar. The defunct chipmaker, which moved to Hillsboro, Ore., several years ago, is a shell company down to one employee, Chief Executive Alex Danzberger Jr. of Minnesota, and an attractive stash of nearly $14 million in cash.

Sajan is a privately held company with about 85 employees that makes advanced language translation software for companies such as 3M Co. CEO Shannon Zimmerman earlier projected Sajan's 2009 sales would be about $14 million.

The deal is a reverse merger that gives Sajan access to capital and public status, Zimmerman said. Zimmerman said he was "excited and optimistic about what this can bring to our business going forward."

The announcement boosted MathStar stock, which trades on the pink sheets. Shares were trading Tuesday around $1.55, up 20 cents or about 15 percent. MathStar is estimated to have about 300 investors, most in Minnesota.

The merger is central to the ongoing feud between Tiberius Capital II, a private equity fund in Chicago, and the brokers, advisers and executives behind MathStar. Both sides sued each other last fall in federal court in Minneapolis.

The MathStar group has dismissed the lawsuit as frivolous. Tiberius is simply blaming them for the failure of its attempted takeover, members have said.

Perkins is a top MathStar shareholder. He joined the company as a director in February 2009 and had about 143,777 shares at that time. In an interview, Perkins said that MathStar's founder, Doug Pihl, asked him to join to help find a company for MathStar to do a reverse merger with. Perkins said his company was involved with a few of Pihl's previous companies -- including RocketChips Inc., which he sold in 2000 to Xilinx Inc. for more than $200 million.

MathStar's journey began in Minnesota in the late 1990s. The company developed a high-speed programmable computer chip and raised $24 million in a public stock offering in 2005 that was underwritten by Feltl and Co. It relocated to Oregon that same year.

Pihl resigned from MathStar last July, saying he disagreed with the Sajan merger, which would dilute MathStar shares and drain MathStar's cash by distributing nearly half of it to Sajan shareholders. He had wanted to restart MathStar.