Nortek Signs Agreement to Buy Linear Corp., Thwarting ITI Bid
Nortek, a Fortune 500 conglomerate that owns Dixieline Lumber Co. in San Diego, on Thusday signed a definitive agreement to acquire Carlsbad-based Linear Corp. in a deal valued at $55 million.
If completed, Nortek’s friendly offer would dash an acquisition bid begun in June by Interactive Technologies Inc., a company based in North St. Paul, Minn., that, like Linear, manufactures home security devices.
ITI President Thomas Auth said he is “not sure” whether his company’s bid for Linear is still alive.
“We’re checking on the legality of what Linear’s board did,” Auth said Friday. “There might be grounds for an injunction (that would stop Nortek’s bid).”
ITI in June acquired 1.3 million shares, or 44%, of Linear’s outstanding stock at $12 per share from Linear Chairman William Schanbacher and President Ted Farrell.
At that time, ITI, which manufactures home security devices, said it wanted to acquire Linear’s remaining stock. Farrell in July said that he expected ITI to tender for Linear’s remaining shares. ITI has still not made such an offer.
Linear President Andy Smalz said Thursday that Linear’s board of directors sold 1.1 million shares of newly issued Linear stock for $13.25 a share, or $15 million, to Nortek, which is based in Providence, R.I. Nortek also negotiated an option to buy 250,000 more shares of Linear stock at $13.25 per share. Linear closed up 1 Friday at 12 1/2.
Following Thursday’s sale, Nortek owns 27% of Linear’s 4.2 million outstanding shares. ITI now owns 31% of Linear’s outstanding shares. The company has about 9 million shares that are authorized but not issued, Smalz said.
Nortek is expected to commence its tender offer by Oct. 30. Linear’s board will recommend that shareholders accept it during a meeting that has not yet been scheduled, Smalz said.
Discussions that led to the deal were started in July by Richard H. Hochman, a New York-based managing director with Drexel, Burnham & Lambert, Smalz said. Hochman serves on the boards of both Nortek and Linear.
Nortek’s bid “represents a good value for shareholders,” according to Blaine Roberts, a La Jolla-based investment adviser who represents investors who hold about 5% of Linear’s stock.
“I’ve said all along that ITI had no intention of making an offer” for Linear’s remaining shares, Roberts said.
Auth indicated on Friday that ITI might not pursue Linear, partly because of Linear’s “poorer-than-expected performance.” Additionally, “Monday’s (stock market) activity puts a question mark on what any (company) is worth,” Auth said.
Linear said Friday that ITI will probably not receive an additional $2-per-share payment because Linear probably won’t meet 1988 sales and profit levels needed to trigger the previously agreed payments.
Nortek’s Holdings
Nortek, a diversified company, owns manufacturing and retail operations that service the residential building, aerospace, industrial and electrical markets. As a manufacturer of home security equipment, Linear is “an excellent complement” to Nortek operations that produce home intercom and music systems, according to a Nortek spokesman.
Nortek acquired San Diego-based Dixieline, a retail and wholesale lumber products company, from Weyerhauser in 1985. Earlier this month Nortek “postponed indefinitely” an initial public offering for Dixieline, according to a Dixieline spokesman.
Linear reported an $891,000 net profit and $13.7 million in revenue for the first quarter ended Aug. 31. It reported a $1 million net profit and $13.7 million in revenue for the first quarter of 1986.
