Micom Agrees to Odyssey Partners’ Bid : Unit to Pay $301 Million for Embattled Simi Valley Tech Firm
Micom Systems, racked by a feud among its directors, has agreed to be acquired for $301 million by the New York investment firm Odyssey Partners.
The deal announced Tuesday calls for MS1 Acquisition Corp., a company formed by Odyssey Partners, to pay $16 for each of the 18.8 million shares of Micom, a Simi Valley-based maker of equipment that enables computers to electronically “talk” to each other.
Odyssey will buy Micom through a leveraged buyout, a deal involving large amounts of borrowed money that is later paid off with funds from the acquired company’s operations or by selling its assets. Although the management of the acquired company often spearheads a leveraged buyout, Micom’s executives are believed to have no stake in the deal with Odyssey. There was no indication of how Micom will be run under the new owners or who will be in charge.
Odyssey Partners was founded with about $50 million in 1982 by Jack Nash and Leon Levy, who had been key executives with Wall Street’s Oppenheimer & Co. They named their investment firm Odyssey after Homer’s epic poem describing the perilous adventures of the Greek hero Odysseus. Nash and Levy did not return calls Tuesday.
Odyssey was a leader in what became the leveraged buyout explosion in the 1980s. One of its most successful investments came in 1983 with Chicago Milwaukee Corp., which was the parent of a bankrupt railroad. The company’s assets have been largely sold, and Odyssey’s profit on the investment has been estimated at about $200 million.
Earlier this year, Odyssey was involved in a bidding war with West Point-Pepperell to acquire textile maker J. P. Stevens. It ultimately struck a truce in which Stevens was sold for $1.22 billion to West Point-Pepperell, which in turn sold Odyssey $530 million in J. P. Stevens assets, including its carpet and industrial fabrics plants.
Micom has been for sale since a dispute surfaced in late March between the company’s management and three dissident directors. The dissidents are William A. Norred, who founded the company 15 years ago and stepped down as chief executive in 1985, and investors John and Sally Thornton of San Diego, who are Micom’s largest stockholders with 2.3 million shares overall.
Sources have said the dispute has stemmed from two issues. One was the purchase last year of Spectrum Digital of Herndon, Va., for $19.4 million in cash and stock, an amount some analysts have criticized as too high. The other is Micom’s lagging stock price, which fell from a high of nearly $50 a share in early 1984 to as low as $6.50 a share after the stock market crash last October.
On Tuesday, the company’s stock closed at $15, up 87.5 cents a share in over-the-counter trading.
To rid itself of the dissidents, Micom initially offered to spend $144 million, or $16 a share, to buy back 9 million shares, or nearly half of its stock, including shares owned by Norred and the Thorntons. A month later, Micom scrapped the plan after several parties showed an interest in buying the company.
Securities analysts said that although the price Odyssey will pay seems low compared to what they thought Micom would fetch, it is unlikely that another bid will come in. Micom has been on the market for so long, they said, that anyone else interested in buying the company would have emerged by now.
Micom, which specializes in products that enable computers to electronically “talk” to each other, is believed to have received only one other serious offer. Last month, a friendly acquisition was proposed for about $300 million by a group comprising the investment firms Warburg, Pincus Capital and Welsh, Carson, Anderson & Stowe IV. The bid was for a base price of $15.62 a share, which would have been adjusted up or down depending on how much Micom would have realized in selling two businesses. The bid expired without being accepted.
