Newport Electronics Accepts Offer by Sensor Control

Just 2 days after Chairman Barret B. Weekes offered to buy Newport Electronics Inc. for $10 million, the Santa Ana company’s directors fell into the arms of another suitor who had earlier offered the same price.

That suitor is Sensor Control Corp., an aggressive Silicon Valley manufacturer of heat and pressure sensors that run machines on factory assembly lines.

Newport Electronics makes the meters used to “read” information from sensors, including some of the devices that Sensor Control manufactures.

If the deal goes through, it would be Sensor Control’s fourth acquisition in 3 years.

The offer values Newport Electronics, with 1.1 million shares outstanding, at nearly $10 million--a handsome price for a stock that had not traded for more than $5.50 in the year before Sensor Control made its offer.

Sensor Control had first offered $8 a share in December but informally raised the offer to $9 early last week, both companies said.

On Thursday, Weekes too offered $9 a share after discussing his offer with seven other company officers.

Weekes, who owns 20% of the stock, abstained Saturday when Newport directors voted unanimously to accept Sensor Control’s offer, said Director Norman Gray, a consultant to the company. That vote behind them, the board took no action on Weekes’ offer.

Weekes--who is also chief executive and president of the company--did not return a call Monday after Newport Electronics announced the deal.

The sale to Sensor Control is contingent on the company obtaining financing by March 3. The agreement signed Saturday also provides for a breakup fee of $300,000 for Sensor if Newport accepts a higher offer for its shares.

Sensor Control already has a lender lined up but no firm commitment. Still, that was enough to give it a leg up on Weekes’ offer, Gray said.

“The board felt his timing was too late,” he said. “Sensor’s initial offer was made in December, and they had a loan commitment from a major lender, even though it was conditional.”

Yet another suitor, which offered $8.50 a share shortly after Sensor Control made its first offer of $8, said it is now out of the running.

InterVen Partners of Los Angeles, whose $8.50 offer expired earlier, said Monday it would not make a higher offer for Newport.

A venture capital firm, InterVen thought Newport Electronics stock was a deal last year when it was trading at $4 a share on the over-the-counter market, or only 70% of the value carried on the company’s own books. InterVen approached Newport Electronics about a buyout that would take the company private.

Newport Electronics reported sales through the third quarter of $13 million; sales were $11.1 million last year. It expects to end the year with about $16 million in sales. But the company said higher expenses this year knocked earnings down to $499,000, from $569,000.

Sensor Control, based in Sunnyvale, is less than half the size of Newport Electronics, with sales of $5 million for the fiscal year that ended in the middle of last year. That was up from $3.7 million the year before. But much of the boost in sales last year actually came from a new company Sensor Control bought.

Profits were a very respectable $529,000 last year, but that was a drop from $885,000 the year before. Sensor Control had to write off $300,000 it spent last year when it gave up a hostile takeover of a New Jersey company.

Few changes are planned for Newport Electronics, Sensor Control President Jim Hawkins said, but he answered with a “no comment” when asked whether Weekes would stay on.

“He’s a fine guy, and it’s obviously a fine company, and that’s all I really want to say,” Hawkins said.