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Unwired Takes On Investor In $56M Deal

Bethesda, Md. — American Capital Strategies has invested a $56 million financing package in Unwired Technology, a wireless headphones and components designer, marketer and supplier for auto entertainment systems and wireless headphones supplier to the auto OEM market and aftermarket.

American Capital, an investor based here, which partnered with Unwired management to complete the deal, will own a 57 percent share of the Plainview, N.Y.-based Unwired after the close. Unwired founder and president/CEO Larry Richenstein is rolling over a portion of his equity in the company, but will retain a significant ownership interest and continue to manage the operation.

“American Capital’s responsiveness, flexibility and financing capabilities make them the right financial partner for Unwired’s continued growth and development,” said Richenstein. No day-to-day operating or personnel changes are anticipated.

“I sold the company for two primary reasons, to take a few chips off the table and to enable Unwired to go to the next step in its development as a company,” Richenstein told TWICE. “I will continue to own a significant interest in Unwired, and to run the company as I have since the beginning. However, the addition of American Capital as my partner will give the company an added degree of professionalism with a real board of directors and the financial support that will allow the company to take advantage of new opportunities as they present themselves.

“The company will continue on its current course as the dominant player in the wireless automotive headphone market,” continued Richenstein. “We are about to begin delivery of our new fold-flat IR headphone for automotive use that has received an overwhelming response from the market. We will also begin production later this year of 2-channel (also referred to as “dual-source”) IR headphones that utilize our new ASIC chip.  This ASIC will give us a cost and reliability advantage in that it will reduce the component count of a 2-channel IR headphone by over 80 percent.”

The transaction was completed late in May, said American Capital, but the deal was not officially announced until the end of last week.

Unwired, called the benchmark for all suppliers of wireless headphones by American Capital, offers strong brand identity, a reputation for quality and service, and leadership technology, said the investor. Unwired serves every major supplier of entertainment systems in the auto OEM and aftermarket, said its new partner.

Founded in 1997, Unwired was the first to adapt wireless headphone technology for in-vehicle use and the first to introduce two-source headphones systems. It produced a single-channel headset for the aftermarket, which was soon followed by dual-source infrared wireless headphones and transmitters.

The company currently produces nine styles of IR headphones and three transmitters. It also offers radio frequency headphones and transmitters in addition to an FM band headphone set and transmitter. Its wireless systems are used for entertainment and information applications in vehicles, including video game, DVD, CD, satellite radio and television, voice-based navigation and MP3 player systems.

Two years ago, Unwired began offering a new proprietary digital technology called WhiteFire, said to be the only four-source headphones system available. WhiteFire permits the digital transmission of up to four high-quality stereo audio signals to vehicle passengers, allowing each to listen to their own audio source.

American Capital is a publicly traded buyout and fund with capital resources of about $5.2 billion. It is an investor in and sponsor of management and employee buyouts, and provides capital directly to private and small public companies.

American Capital’s investment in Unwired takes the form of a senior term loan, senior subordinated debt, junior subordinated debt and equity. The investor also is providing a revolving credit facility and committing to a senior term loan.

Among the reasons American Capital found Unwired to be a “compelling investment opportunity” was its “unmatched market share, low fixed-cost structure and strong cash flow,” said the investor.

Citing Unwired’s reputation for innovate technology, research and development — as well as high-quality products and outstanding customer service — American Capital places the company in an “excellent position for advancement as the market experiences a proliferation of audio sources for automotive vehicles.”