Board Votes to Liquidate GTI and Sell Off Divisions

In a move that drew immediate opposition from one of GTI Corp.’s largest shareholder groups, the firm’s board of directors on Friday voted to liquidate the San Diego manufacturer of electronic parts and circuit boards for the automotive, electronics, aerospace and computer industries.

Board members directed the New York investment firm of Needham & Co. to seek buyers for its divisions after determining that the value of GTI’s individual divisions “exceeded the current market valuation of (GTI) common stock,” GTI Vice President Ron Lust said Friday. “I do not believe that this action is in the best interest of the shareholders and we are a major shareholder,” said H. Lee Rust, president of Baldwin, Rust & Dizney, an Orlando, Fla., investment banking firm that a week ago informed the the Securities and Exchange Commission that it controlled more than 5% of GTI’s stock.

Although Rust, who identified his group as GTI’s largest shareholder, is “not contemplating litigation at this time,” he argued that GTI needs to gain shareholder approval to liquidate the company.

GTI “doesn’t have all the legal answers” to the question of whether shareholder approval of the proposed liquidation is needed, Lust acknowledged.

“GTI’s directors are acting in the best interest of the shareholders,” Lust said. “Our belief is that the parts are worth more than the whole and common sense tells you that you should sell the parts.”

However, Rust argued that the decision to liquidate “is tantamount to management stating that they’re incapable of managing the company.”

Rust, whose firm represents nearly a dozen East Coast investors, described that group as “longer-term investors, not raiders, not interested in liquidation or litigation. We (saw GTI) as a very attractive company that we felt was underpriced.”

Lust said that in April GTI asked Needham & Co. to determine “available alternatives” that would maximize “present value” for shareholders. GTI hired Needham & Co. because “the company’s stock had remained low and it seemed that there must be some other way to return value to the shareholders,” Lust said.

Last week, GTI reported a $4-million net loss and $4 million in revenue for the second quarter. That loss included a $3.4-million charge generated by the writedown of an unsuccessful computer graphics business.

Trading of GTI’s stock was stopped after the opening of the market on Friday. It stopped trading at $2.25.