Struggling software house sells subsidiary

Lernout and Hauspie offloads Mendez to pay back debts.

Lernout and Hauspie (L&H) is selling off its Mendez subsidiary in an attempt to pay back its bank debts.

The translation arm of the struggling speech recognition company is in the process of being acquired by US-based multilingual content management firm Lionbridge, as predicted by Computer Reseller News earlier this month.

Mendez, which has an annual turnover of $80m, is being acquired for just $27m, plus $6m after the deal closes for outstanding Mendez payables to L&H. The acquisition is still subject to approval by US and Belgian courts, and will follow 30 days during which prospective buyers can make offers privately.

At the end of this period, the company will be put up for open auction when any other bidders can come forward, explained Florita Mendez, chief executive of Mendez.

"We wanted to break from L&H as soon as possible," she said. "There was a lot of suspicion from potential buyers thinking we might be contaminated by the L&H fraud, and a number of potential investors didn't want their names associated with L&H. But I needed to take into account the future of the company, so price did not come in to it."

The deal, which is due to be completed by the third quarter, will see L&H and Lionbridge having joint full ownership of certain Mendez language translation technologies, including iTranslator. The two companies will not be allowed to manufacture competing products, however.

Cathy Maloney, vice president of corporate communications at Lionbridge, said the move was positive for both companies.

"This acquisition would be the capstone of the localisation industry consolidation. It would also fulfil the vision of both companies to be the clear industry leader," she said. "Mendez's translation technology with Lionbridge's change management and content management technology create a compelling globalisation platform."

L&H declined to comment on speculation about the possible sale of its other subsidiary called Dictaphone.