After twice spurning lesser offers from Sterling Software, Informatics General of Woodland Hills has agreed to a $135-million takeover bid from the much smaller Dallas company, executives of both firms said Friday.
The bid for all 5 million shares of Informatics culminated months of struggle between the two software makers, during which Informatics' board rejected Sterling offers of $25 and $26 a share. But it voted Thursday night to accept a $27-a-share bid rather than an unspecified leveraged buy-out bid by its own chairman, Walter F. Bauer, who founded the company in 1962.
Wall Street analysts said the price is a fair one for a company of Informatics' strong sales and weak profits.
"From the point of view of Informatics' shareholders, it's a very good deal," said Charles Frumberg, who follows the company for the New York brokerage of Mabon, Nugent & Co.
The merger agreement calls for Sterling to make a tender offer by Thursday, with the deal contingent on two-thirds of Informatics' shares being tendered. The deal is also contingent on Sterling's arranging financing, but Drexel Burnham Lambert, its investment banker, has said that it is "highly confident" that it can arrange financing by July 17, the deadline in the agreement.
"They had three people making proposals," Sterling Chairman Samuel E. Wyly said. "In the end, the board decided the Sterling offer was the best one. I believe it to be the highest cash offer."
One of the offers, Wyly said, was a buy-out plan from an investor group led by Bauer. The other offer was not disclosed.
Wyly said Bauer will continue as chairman--acting in an advisory role--of Sterling's new Informatics unit, which eventually will be fully merged with Sterling. He said it has not been decided where the new company will have its headquarters.
$4.7 Million in Earnings
Bauer, who declined to be interviewed, holds 60,510 shares of Informatics, a company spokesman said. That would fetch $1.63 million at $27 a share, and Bauer could profit further by converting some of his options, which the spokesman said entitle him to buy 39,172 additional shares at various prices.
Informatics, a company with earnings of just $4.7 million on revenue of $191.2 million in 1984, was considered a lackluster performer on Wall Street before Sterling began buying its stock in mid-March, prompting a run-up from around $17, about the company's book value, to $26.375, up 37.5 cents, Friday on the New York Stock Exchange. Sterling closed at $10.50, down 75 cents, on the American Stock Exchange.
Informatics' 1984 earnings of 82 cents a share were down from earnings of $8.5 million, or $1.67 a share, in 1983, due to the sale of some unprofitable units and to high costs and low sales associated with its Answer software series.
Informatics also had a poor first quarter this year, posting profits of just $68,000, or 1 cent per share, on sales of $49.5 million, versus profits of $672,000, or 12 cents a share, on sales of $40 million for the same period last year. But the company has also shown strong sales growth over the years, has little long-term debt and holds about $17 million in cash. With offices throughout the United States as well as in Canada and Europe, it also has a big distribution system.
As a result, Wall Street analysts have generally reacted warmly to a possible takeover in the hope that new ownership might focus Informatics and shed slow-moving product lines.
"The performance in recent years hasn't been overwhelming," said Joseph Kapka, a vice president with the Bateman Eichler, Hill Richards brokerage firm. "Perhaps some new leadership can get things growing a little."
But one analyst was skeptical that Sterling can do the job.
"They are all deal-makers," said Robert O'Connor, who follows Informatics for the brokerage firm of Tucker, Anthony & R. L. Day in Stamford, Conn. "They are not great operators."
Sterling, only about a tenth the size of the company that it will swallow, earned $1.4 million on revenue of $18.7 million during the fiscal year ended Sept. 30, 1984.