Plenum Offers $128 Million for A. D. Little
Plenum Publishing Co., a small publisher of technical journals and books with $12 million in profit last year, on Monday offered to pay about $128 million to acquire Arthur D. Little Inc., one of the nation’s leading technical consulting firms.
The offer was disclosed when Plenum released a copy of a letter that it sent Monday to John F. Magee, Little’s chairman and chief executive, following what a Plenum executive said was several weeks of fruitless attempts to meet personally with Magee.
In the letter, Plenum Chairman Martin E. Tash offered $50 each for the Little shares held by the consulting firm’s Memorial Drive Trust, a tax-exempt fund for employees of which Magee is the trustee. Plenum said that, after a merger, it would offer the same terms to Little’s remaining shareholders. Alternatively, Plenum said it would be willing to offer the trust $40 a share plus $10 in debentures convertible into Plenum stock.
Holder Favors Deal
The trust owns about 70% of Little’s 2.56 million shares outstanding. The largest outside shareholder is Quest Advisory Corp., a New York mutual fund group, with about 6%. Sources close to Plenum contend that Quest favors the deal, but its fund manager could not be reached to confirm that. A. D. Little stock has been trading over-the-counter at about $35. On Monday, the stock closed at $46, up $11.75. Plenum shares closed in OTC trading at $27.75, up 75 cents.
The offer satisfies some mild curiosity in New York investment circles over how Plenum would use $50 million that it raised in April through an issue of subordinated debentures. The issue was underwritten by Bear, Stearns & Co., which subsequently proposed that Plenum use the proceeds to bid for A. D. Little, Tash said. In all, Plenum has a war chest of more than $90 million, including the securities proceeds and $40 million in internally generated cash. The company also has a credit line from Bank of New York.
For all that, Tash said, “we are proposing only the friendliest of deals. This is not a raid but a good business deal.”
Magee, reached by telephone Monday in his Cambridge, Mass., office, said tersely to a reporter before hanging up: “We have received the letter and will respond to it in due course.”
In a statement issued later, Little said its board will meet over the offer “in the near future.”
Turned Away Overtures
Tash said Magee had turned away all previous overtures on Plenum’s behalf by Bear Stearns “over the past several weeks.”
The 101-year-old A. D. Little is one of the country’s best-known multinational consulting firms, specializing in research and engineering. Last year, it earned $6.5 million on revenue of $248 million. On Monday, the firm announced sharply higher second-quarter and first-half 1987 revenue and profit. In the second quarter ended July 3, it reported net income of $1.8 million, up 10% from 1986, and revenue of $69.3 million, up 9%. For the first half, the firm reported revenue of $136.5 million, 13% higher than the same period last year, and net income of $3.7 million, up 59% over the first half of 1986.
English Translations
Plenum is a 40-year-old New York publishing house whose most important asset appears to be an agreement with the Soviet Union giving Plenum the rights to execute and distribute English translations of a raft of Soviet technical journals. The agreement, which dates back to the 1940s, was extended last year for a 10-year term.
Plenum made $12.2 million last year on revenue of $38 million. Of the profit, however, $7.5 million came not from publishing but from the company’s securities portfolio, overseen by Tash.
In his letter to Magee, Tash said the merged firm would be known as Arthur D. Little Group. In an interview, he said, “We realize they’re 100 years old and we’re 40. We want their name to be the surviving name.”
He said he believed that although Little’s management controls a majority of the firm’s stock through their trusteeship of the Memorial Drive Fund, they would be forced to seriously consider the Plenum offer as fiduciaries to the firm’s employees and shareholders.
