Ultrasystems Will Be Acquired by Hadson Corp.
Ultrasystems, an Irvine-based engineering and construction firm, said Friday it will be acquired by Hadson Corp., an Oklahoma City-based natural gas producer, in a transaction valued at $89.1 million.
Phillip J. Stevens, president and chief executive officer of Ultrasystems, said that he will leave the company when the deal closes in February to work for Native American causes. Stevens, who is part Sioux, became an activist for Indian causes in 1969, the year he founded Ultrasystems.
“I am personally enthusiastic about the merging of our two companies to create the nation’s leading independent gas and electric company,” Stevens said. “With this change, I will be involved in a greater amount of philanthropic work for the American Indians.”
Under the terms of the proposed acquisition, Ultrasystems shareholders will receive 2.2 shares of newly issued Hadson common stock in exchange for each outstanding Ultrasystems share. Hadson will be the surviving company.
After the announcement Friday, Ultrasystems stock jumped 49% to close at $8.75 per share, up $2.875, on the American Stock Exchange.
Hadson stock rose 50 cents Friday to close at $5 per share in the over-the-counter market. Based on Friday’s closing prices, Ultrasystems shareholders would receive Hadson stock worth about $11 per Ultrasystems share. With 8.1 million shares of Ultrasystems stock outstanding, the deal is valued at $89.1 million.
The company will keep the Hadson name and will be based at Hadson’s headquarters in Oklahoma City. No layoffs among Ultrasystems’ 1,300 employees are anticipated, Stevens said, and the company’s current operations will continue.
Ultrasystems will be split into two Hadson subsidiaries: Ultrasystems Defense and Space, and Ultrasystems Power and Environmental Group.
“We anticipate growth opportunities for our people as a result of the merger,” Stevens said. “No change in the facilities . . . no relocation is anticipated.”
The new companies are expected to produce combined annual revenues of more than $550 million in 1987, which, Stevens said, will put Hadson among the nation’s highest-earning 1,000 firms.
When Stevens founded Ultrasystems, he patterned the company after the Fluor Corp., going after engineering and construction contracts for energy products. The company derives a substantial portion of its annual revenues, which totaled $156 million last year, from military projects, which have cushioned it from a steep decline in energy-related construction.
Ultrasystems now has has six major power plants operating; four are in California, two in Maine. Four more plants--two coal-burning and two wood-burning--are being built in California, Stevens said, and an “unspecified number” of East Coast projects are being developed.
Through its Ultrasystems defense and space subsidiary, Ultrasystems develops defense and space projects, with an emphasis on intelligence and communications programs.
Hadson is involved with natural gas and crude oil marketing and transportation and domestic and international gas and oil exploration and production.
Before 1985, however, the company was involved only in oil and gas exploration.
‘Severe Problems’
“When the oil and gas situation ‘went south,’ with reduction in oil and gas prices, they had severe problems,” said John H. Dean, chairman and chief executive of Ultrasystems’ defense subsidiary.
“Revenues shrunk to $16 million in 1984. . . . The company changed strategy and expanded to development, processing, transportation and marketing of natural gas.”
This week, Hadson reported a 21% increase in net income on record nine-month sales of $307.5 million, according to a prepared statement.
Ultrasystems’ existing and planned power plants and its engineering and construction expertise will provide “a powerful base for Hadson’s entry into the growing independent power generation and microcogeneration business,” Stephen W. Houghton, president and chief executive of Hadson said in a prepared statement.
Houghton will be the chief executive of the new company. Ying Tzyong Du, Ultrasystems’ senior vice president and chief financial officer, will have the same titles with Hadson. Russell Greengard, an Ultrasystems’ senior vice president, will leave the company.
For the last 19 years, Stevens has split his time between running his company and stumping for Native American causes. He has acted as an adviser to minority businesses through the Small Business Administration and has raised money from his employees for needy Native American families.
ULTRASYSTEMS INC. AT A GLANCE
Based in Irvine, Ultrasystems is a high-tech company engaged in the development, engineering and construction of electrical power generation facilities. The company also develops defense and space systems, with particular emphasis on intelligence and communications programs. Earlier this week, Ultrasystems announced the formation of a joint venture company with a subsidiary of Baltimore Gas & Electric to operate small power plants and energy co-generation facilities.
Year ended January 31: (in millions) 1987 1986 1985 1984 1983 Revenue $156.0 $149.2 $140.0 $81.7 $51.7 Net income 1.7 7.1 0.4 5.3 2.5
Assets: $97.2 million Employees: 1,300 Shares outstanding: 8.1 million 52-week price range: $4.25-$14.375 Friday’s close (ASE): $8.75
