HCC Panel Gives Sweetened Buyout Offer Its Approval
A special committee of HCC Industries’ board of directors last week approved a sweetened offer from a group of the company’s top managers, plus an outside investor, to buy HCC for about $11 million in a leveraged buyout.
The investment group, led by HCC Chief Executive Andrew Goldfarb, will offer $9 per share for the 65% of HCC stock it doesn’t already own, as well as for some additional shares owned by members of the group individually for the Encino-based maker of electronic connection devices.
Their $9-per-share offer is 50 cents per share higher than the group’s original bid, announced in August.
In a typical leveraged buyout the assets of a company are put up as collateral to help an investment group finance the purchase.
Two key HCC stockholders, however, had no comment on the tender offer. The stockholders, Edward and Murray Pelta, are sons of a former HCC principal who died in July, leaving them a 16% stake in HCC. In August, the Pelta brothers, before Goldfarb’s first bid for HCC, said they planned to seek a voice on the company’s board.
The HCC investment group reached a tentative agreement with Bank of America for up to $11 million in short-term financing to help pay for the takeover, according to a filing with the U.S. Securities and Exchange Commission.
Goldfarb said their group would pay back the $11 million using about $5 million in cash now held by HCC and about $6 million from a permanent line of credit Bank of America also tentatively agreed to extend the company.
Bear Stearns & Co., the investment banking firm HCC hired to evaluate the managers’ buyout offer, said the $9-per-share offer was fair to stockholders.
HCC hired the investment banker after a group of stockholders filed suit to block the takeover in September. The dissident stockholders claimed the earlier, $8.50-per-share offer was “grossly inadequate.” An attorney for those stockholders could not be reached for comment on the new offer.
HCC’s performance has improved recently. Its earnings rose 170% for the quarter that ended July 1 to $453,000 on sales of $7.1 million, compared to a profit of $168,000 on sales of $6.8 million a year earlier.