Woodland Hills Printer Maker Is Looking for Right Suitor
Dataproducts Corp. is being shopped around to prospective buyers. And analysts and major shareholders of the Woodland Hills computer printer maker believe its next owner could well be Japanese.
Earlier this month, Dataproducts said “qualified prospective strategic buyers” are being sought by the company’s New York investment banker, Goldman, Sachs & Co. The move came following the disclosure by an investment group led by Wall Street veteran John K. Castle that the group owns 1.4 million Dataproducts shares, or about 7% of its stock, and wants to gain control. Last Tuesday, the group said it retained Chase Manhattan Bank to help arrange financing to buy Dataproducts.
Dataproducts won’t say how its search for potential buyers is going. Chairman Jack C. Davis said Friday that he and other directors have given Goldman, Sachs no deadline to find prospective buyers and added that the company is trying to keep its business running normally.
“We are trying to operate as efficiently and as effectively as we can,” Davis said.
Analysts and shareholders familiar with Dataproducts said the most interest in buying the company will probably come from Japan, most likely from such technology conglomerates as Toshiba, Hitachi, Fujitsu and Tokyo Juki.
Japanese companies, they said, would be interested for two reasons: First, Dataproducts has a wide range of customers. As the nation’s biggest independent maker of computer printers, its products are bought by such firms as Unisys, Digital Equipment, Wang and Data General, which in turn sell them as part of their office systems. For the nine months that ended Dec. 24, the company posted sales of $268.1 million, earning a profit of $3.6 million.
The second reason is that Dataproducts owns the rights to a new technology the Japanese don’t have in which machines print by spraying ink that comes from a heated, crayon-like bar.
The machine, called a solid ink-jet printer, has been slow to sell since being introduced in 1987. Technology analysts believe buyers have resisted because of the printer’s high price, now nearly $3,000. Dataproducts does not release figures on sales for the printer or its development costs. Securities analysts estimate that the company has annual sales of about $5 million and that it spent between $50 million and $100 million over the years to develop and launch the new printer.
Despite the slow sales, the printer’s technology has been widely praised because it is quiet, prints cleanly without being messy and eventually will print high-quality color. Should the price come down, some analysts speculate, it could become the printer of choice in offices in the 1990s.
“The crown jewel of Dataproducts is the solid-ink jet printer,” said William D. Easterbrook, a computer equipment analyst in San Francisco for Kidder Peabody & Co.
Japanese companies, securities analysts say, may want to buy the rights to the Dataproducts technology before it threatens their laser printer business. Laser printers use a laser beam to produce sharp images.
Another attraction of Dataproducts is that the company has some valuable assets. Robert Anderson, an analyst with Brean Murray Foster Securities in New York, estimates that the company has about $100 million worth of cash and land in the Warner Center section of Woodland Hills.
It is less likely that the buyer for Dataproducts would be European, analysts said. But Dataproducts has a close relationship with some companies there, supplying West Germany’s Siemens AG and Italy’s Olivetti. Another name mentioned as a possible buyer is Memorex Telex from The Netherlands.
The least likely buyer, they say, would be an American company or a management-led group. U.S. companies that might be interested, such as Genicom Corp., a computer printer company in Waynesboro, Va., are probably too small to buy Dataproducts, they said. And a management buyout, which would require large amounts of borrowed money, is considered risky because the technology business is so volatile.
One likely bidder will be the New York investment group led by Castle, who was a key figure on Wall Street in the early 1980s, when he was chief executive of Donaldson, Lufkin & Jenrette.
Castle said last week that his group, which surfaced as a potential buyer in December, is eager to review any information Dataproducts provides potential buyers. The group has previously said it might consider bidding $15 a share for the company, which would put the company’s value at $300 million.
Wall Street analysts said they believe Castle, who left Donaldson, Lufkin & Jenrette in 1986 to form his own firm, is eager to make a major acquisition such as Dataproducts, especially after hinting for two months that his group may bid for the firm.
“Castle’s reputation is on the line,” Easterbrook said.
Dataproducts’ stock closed Friday at $17.125 a share in trading on the American Stock Exchange, up 25 cents.
KEY DATES:
April 10, 1988: Dataproducts, led by Jack C. Davis, announces loss of $14.9 million for year ended March 26, 1988.
Dec. 23, 1988: New York investment group, led by John K. Castle, discloses it owns 5.2% of Dataproducts and may seek control.
Feb. 2, 1989: Group is joined by other investors, raising stake to about 7%.
Feb. 10, 1989: Dataproducts says it will search for potential buyers for the company.
