Colt Approves Buyout Plan; May Trigger Bidding War

Colt Industries Inc., the New York-based diversified manufacturer and defense contractor once known only for its firearms, said Thursday that it will be acquired in a leveraged buyout for $526.6 million by an investor group that includes its senior management.

Colt, a name synonymous with American firearms, said it reached a definitive agreement to be acquired by an investor group led by Morgan Stanley Group affiliate Morgan Stanley Leveraged Equity Fund II and Colt senior management for $17 a share.

But the company’s stock price closed up $4.675 at $18.875 on the New York Stock Exchange on Thursday, prompting Wall Street analysts to speculate that a higher, competing offer may emerge.

“Someone else who may want to buy Colt could make a competing tender offer for $19 or $20 and put the company in the position of having to top that,” said Jim Creedon, analyst at Moseley Securities.

Colt, which makes M-16 rifles, the standard combat weapon for the Army and Marine Corps, has about 18,000 employees and has become a diversified manufacturer with a wide-ranging product line.