2 Firms Offer $300 Million to Buy Out Micom Systems

Micom Systems, put up for sale nearly three months ago because of a squabble between management and three dissident directors, including John and Sally Thornton of San Diego, said Wednesday it has received a friendly buyout offer of about $300 million from two New York investment firms.

The investment firms--Welsh, Carson, Anderson & Stowe IV along with Warburg, Pincus Capital--are offering a base price of $15.62 for each of the 19.2 million shares in the Simi Valley maker of computer communications equipment.

The investors said they want to sell two Micom units, Micom Interlan and Micom Digital, as part of the deal. The payment to Micom shareholders ultimately would be adjusted up or down depending on whether the investors get more than or less than $70 million from the divestitures.

If the units are not divested by the time the investment firms acquire Micom, shareholders would receive $12 a share and an IOU promising to pay them proceeds when a sale closes.

Buyout Plan Scrapped

Micom went on the block in April after the company scrapped a plan to buy out the 22% stake held by three dissident board members, the Thorntons, who helped finance Micom over the years, and ex-chairman William Norred, who founded the company in 1973. The dissidents are said to have been upset at management over the company’s languishing stock price and for spending too much on a recent acquisition.

Micom initially offered in March to buy back nearly half of its stock--including the shares held by the dissidents--for $16 a share, or $144 million. But the company scrapped the offer after receiving overtures from possible buyers.

Raymond V. Thomas, Micom’s chief financial officer, said the company’s directors, who are not a part of the bidding group, will consider the offer next week. He said that other potential suitors are showing interest, but added that the disclosed offer is the firmest one.

In San Diego, Micom’s largest shareholder, John Thornton, called the bid an “offer of substance” from the two firms, but said he believes the bidding may go higher.

“Fortunately, this is the first offer and there more may be more behind that. Usually these offers go up. They improve with time,” said Thornton, who, along with his wife, owns about 2.3 million Micom shares. The Thorntons stand to receive about $40 million if the offer is accepted.

Andy Schopick, an analyst with Gartner Securities Corp. in Stamford, Conn., said that the offer is too low because Micom made it clear its stock was worth $16 a share only two months ago.

“Micom has basically established a floor. I think they will continue to move forward and hold discussions that will realize a value to the shareholders of at least $16 a share,” he said.

Offer Rejected

Bruce Anderson, one of the partners in Welsh, Carson, Anderson & Stowe, said his firm and its partner have considered making an offer for Micom since last year. He also confirmed that an informal offer was made by the firms then but was turned down.

Anderson defended the group’s bid, adding that there is no obligation to offer $16 a share in the wake of the canceled stock buyback.

“Fortunately, in this world you can bid anything you want,” Anderson said. “We looked at this three or four different ways and came up with the price.”

Anderson added that the group will not launch a hostile offer if Micom rejects the bid.

If the bid is successful, Anderson said, Micom’s two remaining businesses--its basic computer communications equipment operation and its catalogue business that sells computer-linking equipment and accessories--would be split into two separate companies.

Warburg Pincus’ investment holdings include a 20% stake in Mattel, the Hawthorne toy maker. Welsh Carson is a group of 50 limited partners with about $500 million in funds it invests for undisclosed corporate pension funds, wealthy families and university endowments.

Micom’s stock closed Wednesday at $14.75 a share, down 25 cents, in the over-the-counter market.

Times staff writer Chris Kraul in San Diego contributed to this story.