MSI Data Agrees to Be Acquired by N.Y. Supplier

In an effort to stave off a hostile suitor, MSI Data Corp. of Costa Mesa agreed Thursday to be acquired by one of its largest suppliers in a deal valued at $142 million.

The buyer, Symbol Technologies of Long Island, N.Y., is the dominant domestic supplier of bar-code scanning equipment used for such purposes as tracking inventory on supermarket shelves and scanning clothing prices in department stores.

Symbol offered to pay $23 per share in cash to acquire MSI, which makes hand-held computer terminals.

MSI is the target of a hostile takeover bid by its chief rival in the hand-held terminal business, Telxon Corp. On Wednesday, the Akron, Ohio, company sweetened its offer for MSI to $20 per share. It had launched a $17-per-share tender offer for MSI on Sept. 9.

Analysts suggested Thursday that the bidding for MSI may not be over, although some discounted the possibility that Telxon would increase its latest offer.

MSI’s stock jumped $1.75 per share Thursday to close at $23.25, slightly higher than Symbol’s offer. The stock was trading at about $11 before Telxon launched its offer.

“The market seems to still be expecting another bid,” said E. Lawrence Hickey, an analyst with First Analysis Corp. in Chicago. Analysts said they didn’t expect the bidding to rise much above $25 a share.

Officials at Telxon wouldn’t discuss the possibility of a higher offer.

MSI, which pioneered the hand-held terminal market in 1967, employs about 800 people. MSI officials said they anticipate no reductions in employment as a result of the Symbol deal.

MSI and Telxon control about 50% of the fast-growing market, now estimated at $500 million annually, for hand-held computer terminals. About 60% of MSI’s products are equipped with bar-code readers, said Paul Schneider, MSI’s chief financial officer.

Symbol supplies about 90% of the portable bar-code scanner market, according to a recent report by Prudential-Bache Securities.

Bar codes contain price and product data that can be read by computers to identify supermarket items, clothing and a growing number of other products. They typically are used to keep track of inventory and determine prices.

Symbol’s purchase of MSI Data “is a very sensible acquisition, and the price is right,” said James D. Dougherty, an analyst with County Securities USA, a subsidiary of New York-based National Westminster Bank.

A Symbol-MSI combination would provide MSI with access to the New York firm’s laser-scanning technology and inroads into markets, such as department stores, where Symbol is especially strong, said Charles Strauch, MSI’s president and chief executive.

Symbol would benefit from MSI’s overseas marketing strength, where MSI recorded 45% of its $90 million in sales for the year ended March 26, 1988. MSI will also get Symbol into the portable computer terminal systems market without having to make heavy investments, Strauch said.

“The synergy is there; the fit is very good,” Strauch said. “The fat lady hasn’t sung yet and other things could still happen. . . . We’re very much on the alert to any new situations.”

Strauch said that Symbol Chairman Jerome Swartz “has indicated sincerely that he feels our management team is quite strong.”

Strauch, a corporate turnaround specialist who joined a then-struggling MSI in 1984 and has led it back to financial health, said he plans to remain with the firm.

Symbol is regarded by analysts as a highly profitable firm and a leader in laser-scanning technology. The New York firm’s revenue nearly doubled to $89 million in the fiscal year ended June 30, 1988, while earnings jumped 152% to $20.2 million.

In agreeing to be acquired by Symbol, MSI may have saved itself from being taken over by Telxon, its longtime rival.

MSI has taken several other actions to stop the Telxon bid.

The company adopted a “poison pill” anti-takeover plan that would make an unfriendly takeover prohibitively expensive. MSI also filed a lawsuit in federal court in Delaware seeking to prevent Telxon from proceeding with its offer until a 3-year-old patent litigation suit between the two companies is resolved.

Telxon has a suit pending against MSI accusing the Costa Mesa firm of illegal use of Telxon trade secrets.

Strauch denied that ill feelings between his company and Telxon were a factor in MSI’s opposition to Telxon’s offer. “They (Telxon) made two bids that weren’t adequate,” he said. “If there’s bad blood, I don’t know about it.”

Strauch also disclosed that MSI has been searching for a merger partner for the past year as a way to increase its worldwide competitiveness. Symbol was on MSI’s list of companies that might make good partners.

Symbol officials suggested a merger to MSI management after Telxon launched its initial tender offer, Strauch said. Other companies besides Symbol and Telxon approached MSI about a possible merger in the past three weeks, but none made a formal offer, he said.

“We have known these people (at Symbol) for years,” Strauch said. “We are compatible from a chemistry point of view.” Strauch said the merger agreement with Symbol contains no formal employment guarantees for MSI management. But he said Symbol officials have told MSI managers that they all will be offered jobs in the merged company.

Symbol already owns 234,200 shares, or 4.5%, of MSI’s stock.

Under the agreement, Symbol would receive a $6-million cash payment plus up to $2 million in expenses if the merger with MSI is not completed.

MSI would become a subsidiary of Symbol. Both companies would retain their separate names.