Sterling Raises Bid for Informatics
Sterling Software, which had offered $25 a share for Informatics General of Woodland Hills, has raised the ante by $1 in a stepped-up effort to acquire the much larger California software company.
Officials at Informatics declined to comment on the new offer, worth about $130 million. Last week, the company called the $25-per-share offer inadequate and recommended that shareholders reject it. It is also proposing that anti-takeover measures be adopted by shareholders when they meet May 9.
Dallas-based Sterling said Tuesday that it will try to persuade Informatics’ shareholders to defeat the proposed anti-takeover measures and to seat two Sterling officers on the Informatics board.
Sterling Chairman Samuel E. Wyly made the latest offer in a letter Monday to the Informatics board, a copy of which was filed with the Securities and Exchange Commission. Sterling’s filing also said that Drexel Burnham Lambert “is highly confident that it can arrange financing” for the proposed takeover.
About 5 million shares of Informatics are outstanding. The stock closed Tuesday on the New York Stock Exchange unchanged at $23.25. Sterling already holds 9.3% of the outstanding shares, which closed at $17 on March 13, the day Sterling began buying. That represents just about the company’s book value.
Informatics is a 23-year-old marketer of software and computer systems to business and government, specializing in systems for law firms and accountants. It has shown impressive sales growth in its two decades of existence, but profits in recent years have been lackluster, analysts say.
Considered Attractive Target
Earnings last year were $4.7 million, or 82 cents a share, on sales of $191.2 million. That compared to earnings of $8.5 million, or $1.67 per share, on sales of $152.1 million in 1983. The 1984 figure included $1.6 million in losses from discontinued operations.
Informatics is considered an attractive target for a takeover because it is cash rich and has little long-term debt. Wall Street analysts say Sterling, started two years ago by veteran software entrepreneur Wyly, has a good chance of succeeding.
“I think the offer is a fair offer,” John J. Girton, who follows Informatics for the San Francisco brokerage Birr, Wilson & Co., said last week of the $25-a-share deal. He said Informatics’ management “has historically not managed the company to good return on equity or earnings growth.”
Sterling had 1984 profits of $1.4 million on revenue of $18.7 million. Its California software operations, consisting of three companies that it acquired, are headed by former Informatics executive Werner Frank, who works from Calabasas. He helped found Informatics in 1962 and left just two years ago.
Like Wyly, Informatics founder and Chairman Walter F. Bauer has been unavailable for comment. The firm’s marketing vice president, Ronald S. Freeman, acknowledged that past earnings have been lackluster but said results should improve soon, thanks to a reorganization last August, when President Bruce Coleman departed. The company also sold off some unprofitable units, including those that sold software to the garment industry and to life insurers, Freeman said.
