Santa Ana Maker of Digital Instruments Has 2 Suitors Now
Newport Electronics Inc. said Friday that it has received a $9.4-million cash buyout offer from InterVen Partners, a Los Angeles venture capital firm, setting off a possible bidding war for the Santa Ana maker of digital instruments.
The $8.50-a-share offer was the second bid for the company in the past 2 weeks. On Dec. 15, Sensor Control Corp. of Sunnyvale offered to buy Newport for $8 a share, or $9 million.
Newport Electronics Chairman Barret B. Weekes said the company signed a letter of intent earlier this week with Sensor to allow the electronics firm to review Newport’s books. Newport received the InterVen offer on Thursday.
Weekes said Newport’s board has not yet reviewed InterVen’s offer, but that both offers would be considered.
“Right now, we are just studying these two proposals,” he said.
Trading Temporarily Halted
Trading of Newport stock was temporarily halted on Friday. The stock closed at $7.125 per share, up 62.5 cents for the day.
Before Sensor’s bid, Newport stock was trading for $4 to $5 a share. It had never traded higher than $5.50 during the previous 12 months.
Jonathan Funk, a general partner at InterVen, said the venture capital firm “is very interested in working closely with Newport Electronics management.”
In the proposed acquisition, InterVen would take Newport private in a leveraged buyout, leaving the management team intact. Management would continue to be major stockholders in the restructured company.
“We are not in the process of launching an unfriendly offer for the company,” Funk said. “Management would continue to be equity shareholders.”
Newport management now owns 34.1% of the company’s 1.1 million shares. Weekes is the largest single shareholder, with 19.6% of the shares.
Funk said InterVen believes that Newport Electronics shares are trading “below their true value, because the company has substantial growth potential.”
Newport is expected to have sales of $16 million this year. For the first 9 months of the year, the company reported a profit of $499,000 on $13 million in sales.
Commitments From Investors
InterVen has commitments from outside investors of $50 million for buyout transactions. In 1983, the company purchased Raypak, a Westlake Village technology firm, for $10 million. InterVen sold the company several years later at “a substantial profit,” Funk said.
InterVen’s bid apparently was in response to an earlier announcement by Weekes that Newport would welcome offers from potential buyers after Sensor’s unsolicited bid.
With two companies now vying for control of Newport, “you might get some sort of competitive game going here,” pushing Newport shares higher in coming weeks, said Jeffrey Kilpatrick, president of Newport Securities in Costa Mesa.
“This falls into an ongoing trend and tends to be confirmation that many of the local technology companies are very cheap compared to their intrinsic value,” Kilpatrick said.
Several Orange County companies, including Micro D, MSI Data, Emulex, Alpha Micro and General Automation, have been recent buyout targets.
