Nortek Shelves Bid for Linear’s Stock in Wake of Disclosure

Providence, R.I.-based Nortek on Friday placed its $55-million bid for Linear Corp. on hold after learning that the San Diego-based company will be unable to renew a lease on its major manufacturing plant in Hong Kong.

Earlier in the week, Linear disclosed that its lease for a plant in Hong Kong will not be extended beyond October, 1988. The plant manufactures wireless radio transmitters and receivers, infrared lighting controls and other mechanical and electronic parts.

Nortek responded to that disclosure by reducing its $13.25 per share bid for Linear’s outstanding common stock to $12.85. However, Nortek on Friday withdrew that lower bid and extended the expiration date of its Oct. 23 tender offer to Dec. 8. The offer had been slated to close Nov. 27.

Nortek wants the added time to “evaluate the costs of relocating the facility,” a spokesman said. After the review, Nortek will try to renegotiate a lower purchase price or simply abandon the offer, the spokesman said.

Linear executives were not available for comment Friday.

“Nortek is playing the same game here that they played with Kincaid Furniture,” said Blaine Roberts, a La Jolla-based investment adviser who represents investors who own about 5% of Linear’s stock.

Earlier this week, Nortek said it would pay $14 per share, or $39 million, for Kincaid, a Hudson, N.C.-based furniture manufacturer. That offer came just weeks after Kincaid rejected an earlier $17 per share offer. Nortek said the $14 per share offer mirrored Kincaid’s value in the wake of the Oct. 19 market crash.

Nortek “hopes it can buy Linear for a better price, just like Kincaid,” Roberts observed.

With the blessing of Linear’s board, Nortek entered the bidding in October by agreeing to acquire 1.1 million shares of newly issued Linear shares at $13.25 per share. Nortek also negotiated an option to acquire 250,000 more shares of unissued stock.

That bid came after Interactive Technologies Inc., a North St. Paul, Minn.-based manufacturer, indicated that it would make a $12-per-share bid for Linear. ITI eventually acquired 1.3 million shares, or 44% of Linear’s stock, at $12 per share.

Nortek on Friday said its offer was contingent upon Linear’s businesses continuing without “any material adverse change(s),” the Nortek spokesman said.

In the wake of the Oct. 19 market crash, Nortek abandoned an initial public stock offering for its Dixieline Lumber Co. subsidiary. Nortek acquired the San Diego-based lumber company from Weyerhauser in 1985.