As markets intensified to the downside in early September, I wrote that this was no time to be an arbitrageur and scratched my own ZICA long.  Glad I did.

Today, Zi Corp.’s suitor, Nuance Communications (Nasdaq:NUAN), dropped its all-cash offer from $.80/share to $.40/share.

“We continue to believe that our all-cash offer is a compelling opportunity to create value for the stakeholders of both companies,” Nuance Chairman and Chief Executive Paul Ricci said in a statement. “Our revised offer reflects recent adverse changes in market conditions, and in Nuance’s assessment of Zi’s valuation following completion of a due diligence review.”

Nuance said it hopes Zi shareholders “will recognize the immediate value and attractive liquidity opportunity this proposal represents and will tender their shares in favor of our offer.”

When Zi Corporation turned down the higher $.80 offer, ZICA’s board claimed the offer didn’t reflect the value of new contracts and business opportunities. They had better be right, because they blew a major chance to restore part of the shareholder wealth they have destroyed over the past year.

Get trend analysis for ZICA from Ino.com.

DISCLOSURE: No position.

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