System Integrators OKs Buyout by Its President
System Integrators, spurning an $8-a-share bid from founder and Chairman James P. Lennane, agreed Tuesday to an alternative buyout led by President Alden Edwards that will give most shareholders $10 a share.
The sole exception will be Lennane, who will receive about $9 a share for his 5,147,424 shares. Based on System Integrators’ 12,034,347 shares outstanding, the total value of the transaction is about $115 million.
Sacramento-based System Integrators, whose chief rival is Eastman Kodak’s Atex unit, is a leading maker of electronic editing systems for newspapers and wire services.
The company’s systems, which are built around Tandem mainframe computers and proprietary software and terminals, are used to edit and publish about 230 papers around the world, including the Los Angeles Times, the Washington Post and the Miami Herald.
Supports Buyout
Lennane, in an interview, said he fully supports the Edwards-led buyout, which will be financed in part by Citicorp Capital Investors Ltd. “This is a purposeful turning point in my career,” said Lennane, who stands to receive more than $46 million in the transaction. “I had made up my mind that I would be either a buyer or a seller, depending on the price,” he added.
Lennane, a 48-year-old veteran of IBM, launched the process that led to Tuesday’s deal in June when he offered $7.25 a share for all the shares he didn’t already own. He boosted his bid to $8 earlier this month.
“The idea was to start an auction process,” Lennane explained Tuesday. A committee of five independent directors, advised by investment banker Kidder Peabody, considered overtures from several other interested parties before unanimously embracing the Edwards-Citicorp bid, said chief financial officer Charles F. Harney.
“Jim Lennane agreed to accept $9 a share to maximize the return to other shareholders,” Harney said. He said the buyers still haven’t decided whether to invite Lennane to purchase a stake in the recapitalized company. “He may stay on as a consultant or a technical adviser,” Harney added.
Publishers Impressed
Lennane, who founded System Integrators in 1973 with five employees, is widely regarded as a “visionary” and a “genius” in the publishing business. He named System Integrators’ most popular desktop terminal, the Coyote, after his favorite full-length coat made of coyote skin.
But it is Lennane’s keen attention to the needs of his clients that most impressed newspaper publishers; indeed, he once bought a small newspaper near Santa Barbara to better understand his customers’ business.
Lennane said his $46-million windfall wouldn’t much change his life style. “I was rich before this,” he explained. He did say would invest some of the proceeds in existing technology firms that, like System Integrators, had gotten the cold shoulder from Wall Street.
For the nine months ended June 30, System Integrators posted net income of $4.7 million on revenue of $49.4 million, up from $3.3 million on revenue of $43.1 million a year earlier.
