ABI Agrees to Be Acquired by PacTel After Spurning Offer From Director
ABI American Businessphones, spurning a takeover offer made by a company director, agreed Friday to be acquired by PacTel Corp. in a stock-swap transaction valued at $18.8 million.
In accepting the PacTel offer, ABI rejected director Jean R. Stiegemeier’s cash offer to purchase the Irvine supplier of business telephones.
Both offers were valued at $11 per share, but ABI said it considers the PacTel offer to be more attractive because shareholders will not have to pay taxes on the PacTel shares they receive until they sell them.
PacTel is a subsidiary of San Francisco-based Pacific Telesis Group, a diversified telecommunications company that also owns Pacific Bell.
“I’m surprised ABI didn’t attract a higher offer,” said F. Van Kaspar, a San Francisco stock analyst. “PacTel is making a heck of a buy here. . . . As a shareholder, I’m disappointed in the price.”
Stock Unchanged
But ABI’s stock, which has traded as high as $13.50 per share during the past year, has remained below $11 in recent months. The stock closed Friday at $10.50 a share, unchanged in American Stock Exchange trading. The PacTel deal was announced after the market closed.
“This is like a new beginning,” said Frank J. Feitz, ABI’s founder and chairman. “It affords my shareholders a very good value and it gives our employees the chance to grow with a much larger organization.
“PacTel is an extremely large company that has very large capital resources to help us grow,” Feitz added. “They’ve been around for 100 years or so and they can probably teach us a few things.”
Feitz, who owns one-third of ABI’s stock, said he and other top managers plan to remain with the company after the sale is completed.
“We’re going to leave the ABI structure intact for now,” said Steven Hubbard, director of strategic planning for PacTel Communications Co., a Pacific Telesis unit. “We understand what they’ve created and we don’t want to lose that by being too hasty in what we do.”
Feitz founded ABI in 1982 and built it into a company that is generally regarded as one of the best-managed and most successful suppliers of telephone equipment in the nation.
Firm Ranked High
ABI has been ranked as one of the nation’s fastest growing small companies. The firm’s revenues increased 11% to $30.1 million for the fiscal year ended June 30. Its earnings increased 38% to $1.5 million.
“It’s pretty well-known in the industry that Frank Feitz and his team have done an excellent job,” said PacTel’s Hubbard.
“When things became tough in the industry (in the mid-1980s), they seemed to be one of the only companies to come out of it.”
ABI’s rapid growth has attracted the attention of several would-be suitors during the past 10 months.
In December, the Irvine firm had agreed to be acquired by a Connecticut telephone manufacturer. But the deal with TIE/Communications fell through after ABI’s investment banker withdrew a report endorsing the merger as fair to shareholders.
In June, company director Stiegemeier offered to buy ABI for $10 a share. ABI’s directors rejected that offer as too low and on July 18, the Minnesota investor raised his bid to $11 per share.
On July 29, ABI said it would accept the Stiegemeier offer unless a comparable or better offer were received by Friday.
‘Formidable Competitor’
Stiegemeier could not be reached for comment on the company’s decision to reject his bid in favor of PacTel’s.
“I spoke to Jean yesterday,” said Feitz. “He knew what we were going to do, and he was satisfied with that.”
PacTel officials said they began talking to Feitz in early July about a possible merger of the two companies. ABI has been a “formidable competitor” of PacTel’s in the phone equipment business, Hubbard said.
During the past 30 months, PacTel has acquired 25 telephone equipment companies, usually called interconnect firms. The ABI purchase would be PacTel’s largest acquisition of an interconnect company.
“When completed, we expect the ABI acquisition to strengthen our prospects for future growth and help us better meet the telecommunication needs of small and medium business customers in California,” said C. Lee Cox, PacTel’s president and chief executive.
Under the deal, expected to be completed late this year, PacTel will acquire servicing rights to the 10,000 phone systems ABI has installed in California, Arizona, Oregon and Nevada. PacTel will also acquire ABI’s 16 sales and service centers.
ABI sells and services telephones and small private-branch exchange systems to customers requiring five to 150 phones at a location. The company employs 300 people, half of those in Irvine.
