VLI Corp. said Monday that it is holding "preliminary" talks that could lead to its acquisition by another company. The terse statement followed a request by the National Assn. of Securities Dealers asking VLI to explain the unusually heavy trading in its stock Friday.
Robert Elliott, president of the Irvine-based maker of the Today contraceptive sponge, refused to identify the potential merger partner. "We have been asked not to mention that and we will abide that request," he said.
Elliott refused to say how much VLI officials think the company is worth.
But on Wall Street Monday, where VLI was the third most-active over-the-counter issue with just over 1 million shares changing hands, traders pushed the price of the company's stock to $5.50 a share, up 87.5 cents for the day. That would put the price tag for the entire company at $63.8 million.
Heavy Volume Again
Monday's volume--nearly 9% of the company's 11.6 million outstanding shares--topped the previous record for VLI, set Friday when 560,000 shares were traded. Friday's heavy volume, which nearly equaled VLI's trading volume for the entire month of September, prompted NASD officials to seek a statement from VLI, Elliott said. "By the time we could put an announcement together, trading had closed," he said.
Wall Street analysts said Monday that they knew little about the deal in the works but suggested that likely suitors could include Johnson & Johnson, Warner-Lambert Co., Carter-Wallace Inc. and Syntex Corp. All either manufacture or distribute over-the-counter and prescription contraceptives. VLI manufactures and markets the Today brand contraceptive sponge.
"Johnson & Johnson is probably the name that comes to most people's minds first," said Cragi Dickson, an analyst with Interstate Securities Corp., Charlotte, N.C.
A spokesman for New Jersey-based Johnson & Johnson declined to comment, and an executive with Syntex, which is based in Palo Alto, denied that his company was negotiating to buy VLI. Officials of the other two companies could not be reached.
However, Pieter Halter, editor of Biomedical Business International magazine, said that a potential suitor probably is more interested in acquiring VLI for the potential its sponge holds as a new means of administering medications than for its potential as a birth-control device.
So far, the sponge is used strictly as a birth-control device, but VLI hopes to file soon for Food and Drug Administration approval of a vaginal sponge that would be used to treat yeast infections.
VLI once traded for up to $26.75 a share, but continued losses have eroded the company's market value. Last month, VLI shares fell to a new 12-month low of $3 a share, just above its book value of $2.30 a share.
As previously reported, VLI posted a net loss of $697,573 for the third quarter, compared to a net loss of $117,899 a year earlier. However, during the third quarter, revenues increased 24% to $5.1 million from $4.1 million.
The merger discussions are still in the early stages, and "there is no offer on the table," Elliott said, adding that the discussions are friendly and that VLI officials are willing to merge if the right deal can be struck.
"You have to put on your shareholder hat," he said. "If it is a deal that is fair and equitable for the shareholders, then that is the way it has to go," he said. Elliott controls about 2% of the company's shares. Other officers, directors and company insiders control an additional 13% of the common stock. VLI CORP. AT A GLANCE
1986 1985 Net Earnings (loss) ($697,573) ($117,899) Revenue $5.1 million $4.1 million
1985 1984 Net Earnings (loss) ($1.4 million) ($6.1 million) Revenue $16.7 million $12.4 million
STOCK PRICE PER SHARE
12-month high $6.75
12-month low $3
Monday's close $5.50
Change from Friday +87.5 cents