Damon Ends Fight; OKs $223-Million Takeover Bid
Damon Corp. on Monday accepted a revised, $223-million takeover offer from a group led by American Magnetics Corp. in Sherman Oaks, apparently ending Damon’s seven-month battle to remain independent.
However, the companies’ agreement also allows Damon, a Needham Heights, Mass.-based operator of clinical laboratories, to solicit alternative offers for 30 days. Damon said it is continuing talks with an unidentified third party about a possible transaction, but said there is no assurance a deal will result.
The American Magnetics group, called Nomad Partners, also includes Ballantrae Partners, an investment partnership led by Robert L. Rosen and Glen M. Kassan, chairman and executive vice president of American Magnetics, respectively. The pair own a combined 14% of American Magnetics, and both also formerly worked for Maxxam Group, a Los Angeles company headed by takeover specialist Charles E. Hurwitz.
American Magnetics makes “optical-character recognition” equipment, the machines used to scan credit-card data at store checkout counters, and the devices inside automated bank-teller machines that read customers’ bank cards. The company, with plants in Carson and Torrance, earned $353,000 on sales of $11.8 million in 1987.
Approved by Directors
The merger agreement with Nomad, which already owns 1.03 million, or 11%, of Damon’s 9.6-million total common shares outstanding, was approved by Damon’s directors but remains subject to approval by its stockholders.
Under the agreement, Nomad would pay $26 in cash for each of the Damon shares it does not already own. Damon shareholders also would get 50% of any after-tax cash from the sale of Damon’s 61% ownership of Damon Biotech, a biotechnology company that is publicly traded.
The 7-year-old biotechnology venture has been a drain on Damon’s profits, and Damon had previously proposed spinning off the unit to its shareholders. But the company said Monday that there would be no such spinoff if the Nomad merger goes through.
Nomad also had promised to shed Damon Biotech, and its previous offer to buy Damon had called for Damon’s stockholders to receive $24 in cash and 1.3 shares of Damon’s interest in Damon Biotech for each of their existing shares.
Wall Street, meanwhile, gave the merger pact a lukewarm response. Damon’s stock closed Monday at $24.625 a share, down 37.5 cents, on the New York Stock Exchange. In over-the-counter trading, American Magnetics closed at $4.125 a share, unchanged.
Nomad began pursuing Damon last June and, after its initial overtures were rebuffed, it launched a hostile $24-a-share tender offer for the remaining Damon stock. Damon rejected the offer as inadequate and proposed spinning off its interest in Damon Biotech.
Damon operates 12 clinical laboratories, which analyze such things as blood and urine samples, and also manufacturers and sells laboratory equipment and diagnostic instruments. In the past three years, Damon has received $25 million in contracts from the U.S. military to test for acquired immune deficiency syndrome, making it one of the nation’s largest testers for the AIDS virus.
The company is the one of the largest independent laboratory chains, but also one of the last. Most of the remaining independents have been bought in recent years by huge drug companies, such as SmithKline Beckman Corp., or medical-products concerns.
Damon also makes school and hobby products, and is one of the biggest U.S. builders of model rockets and kites. In its fiscal year ended Aug. 31, 1988, Damon earned $8.2 million on revenue of $208.2 million.
The proposed Damon purchase is the latest in a string of diversification moves that Rosen has attempted since he took the helm of American Magnetics in 1987. A year ago, he was outbid for DuroText Corp., a New Jersey light-bulb maker, and in April, 1988, American Magnetics bought a shopping center in Florida for $12.4 million.
