Tandem Will Buy Local Network Systems Firm
In a bid to become a full-service supplier, Tandem Computers said Tuesday that it will acquire another Silicon Valley company, Ungermann-Bass Inc., for about $260 million.
Ungermann-Bass stock shot up on the over-the-counter market after the news was announced, rising $3.625 a share to $12.125.
Santa Clara-based Ungermann-Bass is a leading provider of local area network or LAN systems, which allow personal computers to connect with each other and to share data from the same files. For example, computers in an office can exchange information with those at the factory site.
“We have not been very much into the LAN connections until this last year,” said Jerry Held, vice president of Tandem’s New Ventures Group. “It has been very well received by our customers . . . and as they deploy it, they are asking us to come in and provide a more complete solution,” he added.
Tandem designs, makes and sells multiple-processor computer systems, known as Tandem’s Non-Stop, for users with heavy on-line transaction processing requirements. Its systems are designed to minimize the risk of failure and are found on the floor of the New York Stock Exchange and in bank automated teller machines. Its stock fell 37.5 cents a share to $18.25 after the news was announced.
But the acquisition would give Tandem a chance to expand in the networking area and thus provide more services to its customers.
“Tandem has been progressively moving toward becoming a full-service supplier and into the commercial office marketplace with smaller systems and personal computer connections,” said analyst John Jones of Montgomery Securities in San Francisco. “This purchase enhances that move.”
Under the agreement, Ungermann-Bass shareholders will receive $12.50 a share in cash.
The $260-million purchase price is a hefty one for Tandem to pay, analysts said. Ungermann-Bass fended off a hostile $170-million stock swap offer from Digital Communications Associates of Alpharetta, Ga., last November.
“It is definitely top dollar,” analyst Dale Kutnick of Gartner Securities said of the Tandem deal. “It is going to mildly dilute their earnings for a few quarters.”
