SAN DIEGO COUNTY : Cipher Data to Buy Firm in Michigan for $76 Million

Times Staff Writer

Cipher Data has signed a definitive agreement to pay $76.7 million for Irwin Magnetic Systems, an Ann Arbor, Mich.-based manufacturer of computer data-storage products, Cipher Chairman Gary E. Liebl said Wednesday. Irwin reported a $1.6-million net profit and $49 million in revenue for the most recent fiscal year.

Cipher intends to initiate a $13-per-share cash tender offer for Irwin’s 5.9 million outstanding shares before March 9. First Boston Corp. will act as Cipher’s dealer manager.

Irwin has granted Cipher a purchase option on unissued shares of common stock that are equal to 9.9% of Irwin’s outstanding shares. Principal stockholders of the Ann Arbor-based company have granted Cipher options and irrevocable proxies for 14.9% of Irwin’s common stock.

Liebl characterized the two companies as “complementary” because Irwin has concentrated on the 3 1/2-inch minicartridge market while Cipher has focused on different parts of the computer data-storage market. Irwin’s products are “oriented to PC products, and the PC is the fastest growing product,” Liebl said.


Irwin also has “wider distribution channels, particularly in the retail area,” Liebl said. That distribution network includes more than 4,000 retail outlets, according to Liebl.

Liebl said there are no immediate changes planned at Irwin, which has 553 employees in Ann Arbor. “They’re growing very fast and have the need for additional manufacturing capacity,” Liebl said. “We think that our 1,000-person facility in Singapore can help them with that capacity need.”

Irwin’s 1989 revenue could rise to $72 million during 1989, according to a recent report by Drexel Burnham, Lambert, a New York-based investment firm. Drexel also predicted that Irwin’s net income could rise to about $4.4 million for the year.

“It’s a strong company that’s in a growth mode,” Liebl said. “They’ve got a strong balance sheet and no long-term debt.”


Cipher recently reported $7 million in net income and $105.8 million in revenue for the six-month period ended Dec. 31. Cipher reported $2.9 million in net income and $84.7 million in revenue for the corresponding period in the previous year.