Xidex and Charlton Reach Tentative Buy-Out Accord
In an effort to compete with a projected outpouring of Japanese computer disks on the U.S. market, Xidex Corp. said Friday that it has reached a tentative agreement to acquire Charlton Associates of El Toro for stock and warrants valued at $38 million to $57 million.
Xidex, a Santa Clara-based manufacturer of memory-oriented computer products, already holds 24% of the voting shares of Charlton, which is a market leader in manufacturing small-sized, rigid computer memory disks. Xidex acquired its Charlton shares through its purchase last February of Dysan Inc., which was an early investor in Charlton when the company was founded four years ago.
Richard J. Charlton, the firm’s chairman and chief executive officer, said that under a tentative agreement adopted Thursday by both companies’ boards of directors, Xidex will buy the remaining 76% of Charlton by exchanging about 2.23 million newly issued shares of Xidex common stock and 4.6 million warrants to purchase Xidex stock at a price equal to 120% of its fair market value at the time the transaction is completed.
Terms to Be Finalized
Charlton estimated that the shares and warrants exchanged will be worth $38 million to $57 million, “depending on the outcome of the definitive agreement and condition of the market at the time of closing.” He said the terms of the agreement will be finalized within the next three weeks and the transaction will be completed by the end of January.
Until now, Charlton said, the Charlton company has been owned predominantly by venture capital firms.
After the merger, he said, Charlton will retain its company name and management and combine its production with the rigid-disk division of Xidex, a much larger company with $350 million in annual sales, which also manufactures floppy disks and transparencies for memory storage.
As a result of the buy-out, Charlton is expected to “double to triple” its sales of rigid disks, projected to total $36 million in its fiscal year ended today, Charlton said. Xidex will also give Charlton a much broader line of disk sizes.
‘Compete With Japanese’
Xidex officials were not available Friday for comment.
But Charlton said that Xidex is counting on Charlton to provide management expertise currently lacking in its own rigid-disk manufacturing operation.
“What Xidex wants is a crack management team and what Charlton wants is a much larger company to put us in a better position to compete with the Japanese when they get here,” Charlton said.
While Japan has long produced rigid disks for sale at home, Charlton said, it has only recently begun to export its product to the United States. He predicted that the flow of Japanese product into this country “will begin to assume meaningful proportions “ by next year.
