Damon OKs $223-Million Bid From Investor Group

Damon Corp. on Monday accepted a $223-million takeover offer from a group led by American Magnetics Corp. in Sherman Oaks, apparently ending Damon’s seven-month battle to remain independent.

However, the companies’ agreement also allows Damon, a Needham Heights, Mass.-based operator of clinical laboratories, to solicit other offers for 30 days.

The American Magnetics group, called Nomad Partners, also includes Ballantrae Partners, an investment partnership led by Robert L. Rosen and Glen M. Kassan, chairman and executive vice president of American Magnetics, respectively.

American Magnetics makes optical-character recognition equipment, the machines used to scan credit card data at store checkout counters and the devices inside automated teller machines that read customers’ bank cards. The company earned $353,000 on sales of $11.8 million in 1987.

The merger agreement with Nomad, which already owns 1.03 million, or 11%, of Damon’s 9.6 million shares outstanding, was approved by Damon’s directors but remains subject to approval by its stockholders.

Since taking the helm at American Magnetics in 1987, Rosen has led moves to diversify. Damon is one of the last major independent laboratory chains, and, excluding its troubled biotechnology unit, its laboratory business is profitable. Rosen sees its stock as relatively undervalued.

Under the agreement, Nomad would pay $26 in cash for each of the Damon shares it does not already own. Damon shareholders also would get 50% of any after-tax cash from the sale of Damon’s 61% ownership of Damon Biotech Inc., a biotechnology company that is publicly traded.

The 7-year-old biotechnology venture has been a drain on Damon’s profits, and Damon had previously proposed spinning it off to its shareholders. (In its fiscal year ended Aug. 31, 1988, Damon earned $8.2 million on revenue of $208.2 million.) But the company said Monday that there would be no such spinoff if the Nomad merger goes through.

Nomad also had promised to shed Damon Biotech, and its previous offer to buy Damon had called for Damon’s stockholders to receive $24 in cash and 1.3 shares of Damon’s interest in Damon Biotech for each of their existing shares. Now, if the merger goes through, stockholders would apparently receive cash from the sale of Damon’s stake in Damon Biotech.