Sun Chemical, which is fighting a takeover bid by a Japanese company, said Wednesday that it plans to begin merger talks with Chromalloy American.
Sun Chemical said no timetable has been set for the discussions or for making a proposal, and it did not disclose specific terms that might be under consideration.
But it said any combination was expected to be tax-free to shareholders, indicating that the companies are weighing an exchange of stock--a transaction frequently structured to be tax-free--rather than a taxable cash purchase.
Sun Chemical's common stock fell 25 cents a share Wednesday to $62.87 1/2 in New York Stock Exchange composite trading, while Chromalloy's stock jumped $1 a share to $21.50.
Sun Chemical already owns about 36% of Chromalloy's 18.4 million common shares and equivalents outstanding. Based on the closing price of Chromalloy's common stock, the market value of the remaining shares is about $253.3 million.
New York-based Sun Chemical is a leading maker of graphic equipment, printing inks, specialty chemicals and automotive and aircraft parts.
Chromalloy, headquartered in St. Louis, is a diversified concern with interests in metal fabrication, transportation, apparel, oil and financial services.
For the past two months, Sun Chemical has been fighting an unsolicited takeover bid by Dainippon Ink & Chemicals, a Japanese firm. Dainippon has sweetened its bid twice, and its latest offer is $85 for each of Sun Chemical's 7.82 million common shares, or $665 million.
On May 22, directors of Sun Chemical rejected Dainippon's latest proposal. And, while Dainippon has been attempting its acquisition, Sun Chemical's chairman and chief executive, Norman E. Alexander, has raised his personal stake in Sun Chemical to nearly 47% from 33%.
Dainippon officials could not be reached for comment. A telephone call to DIC Americas Inc., Dainippon's U.S. subsidiary based in Fort Lee, N.J., was not returned.
Chromalloy earned $2.17 million last year on revenue of $873.2 million. Sun Chemical's 1985 profit was $4.1 million on revenue of $883.9 million.