Aerospace Firm Raises Lundy Stake : TransTechnology Holds 25% of Shares in N.Y. Company
TransTechnology, a Sherman Oaks-based aerospace and defense company, disclosed last week that it has nearly doubled its stake in Lundy Electronics & Systems. Lundy has a division that TransTechnology wants to buy.
Documents filed with the Securities and Exchange Commission show that, over the last six weeks, TransTechnology bought more than 331,000 shares in Lundy, of Glen Haven, N.Y., for more than $4 million.
That temporarily raised TransTechnology’s investment in Lundy, which was 14.5% in September, to 28.5%. The percentage of stock owned by TransTechnology, however, was reduced last week to 25% when Lundy announced that it is issuing 400,000 new shares as part of an acquisition of Sidereal, a private manufacturer of telecommunications-related equipment based in Portland, Ore.
Lundy Acquisition Possible
TransTechnology, which has been trying to buy Lundy’s defense electronics division for more than four years, repeatedly has said that it doesn’t want to launch a hostile takeover bid for Lundy. But the company, in one SEC filing last year, said it might seek to acquire control of Lundy.
Charles A. Leeds Jr., an analyst in the risk arbitrage department of Herzfeld & Stern in New York who has been following the developments, said he is telling his clients that the chances are better than 50% that TransTechnology will move to acquire Lundy.
“I think they are just getting sick of playing cat and mouse. This is no sure thing by any means. But, if it has an even-money chance, that’s good enough for me,” Leeds said.
TransTechnology Chairman Arch C. Scurlock said in an interview Monday that TransTechnology’s next move is uncertain, but hinted that the company may try to gain control of Lundy.
“We could buy 50% of the company, control it and put in new directors. We haven’t decided what we are going to do, though,” Scurlock said.
Largest Shareholder Called
Scurlock said TransTechnology offered to buy the division from Lundy again three weeks ago for about $8 million, about $3.5 million over its book value, or net worth. He estimated that the division, which makes aluminum-coated glass fibers that produce false radar images when released from military aircraft, had $12 million in revenue and $600,000 in profits in the fiscal year ended June 30.
Scurlock said he doesn’t know if the Sidereal acquisition was an anti-takeover move by Lundy.
Besides issuing 400,000 new shares in the Sidereal acquisition, Lundy also paid $500,000 in cash and $900,000 in notes that can be converted into nearly 67,000 Lundy shares. Allen & Co., a major New York investment banking house that helped finance Sidereal, reportedly will receive about 260,000 of the 400,000 shares.
Lundy would not comment on TransTechnology’s latest purchases.
Lundy’s largest individual shareholder, Long Beach businessman Nickolas W. Edwards, said that Lundy President Edward J. Mulvey called him last week to enlist his support in the event that TransTechnology makes a hostile bid.
“He said he thought he (Scurlock) might take a run at him and wanted to know if he would have my support,” said Edwards, who owns 220,000, or 7.5%, of Lundy’s outstanding shares. Edwards said he did not commit his support to Mulvey, adding that he would want to review any proposal made by TransTechnology.
In its SEC filing, TransTechnology said it paid $11.50 to $12.25 a share for the stock, which it purchased between Nov. 7 and Dec. 9. The largest purchase was on Dec. 6, when TransTechnology paid $2.7 million for 221,500 shares.
The company also disclosed that, for the first time, it will borrow money to pay for acquisitions of Lundy stock. The company said that $3.45 million, which it borrowed from Bank of America, will be used to pay for 280,800 shares. Previously, the company used funds generated internally to finance its purchases of Lundy stock.
