Small Publisher May Try Takeover of Gradco Systems
In a challenge to a proposed management-led leveraged buyout of Gradco Systems Inc., a small New York City publisher said Tuesday it has acquired a 6.3% stake in the office equipment maker and may try to take over the company.
Plenum Publishing Corp., a publisher of scientific books and journals, revealed its Gradco holdings in a filing with the Securities and Exchange Commission. The disclosure comes less than two weeks after Gradco Chairman Keith B. Stewart said he was having difficulty coming up with funding for his proposed buyout of the company.
A group led by Plenum, and including Plenum Chairman Martin E. Tash and other company officers, began buying Gradco shares on Sept. 29, the day after Stewart announced that he was trying to put together a buyout of the company.
According to the filing, Plenum said it decided to invest in Gradco in order to profit from the proposed management buyout. But when Stewart announced Dec. 1 that he was having trouble financing the deal, the group decided it would act to “maximize shareholder values.”
The New York firm paid $6.8 million to acquire the Gradco shares, which were purchased between Sept. 29 and Dec. 5 at prices ranging from $11.62 per share to $18.87 per share, the filing said.
In over-the counter trading Tuesday, Gradco’s shares closed at $11.625, up 37.5 cents.
Gradco officials could not be reached for comment and Plenum officials declined to comment beyond the SEC filing.
Jeff Kilpatrick, president of Newport Securities Corp., a Costa Mesa investment firm, said a hostile takeover of Gradco would be difficult because Stewart and other company insiders own 16% of the firm’s stock.
By failing to complete its offer for the company, Kilpatrick said, Gradco management attracted attention to the company and made itself vulnerable to a takeover bid from an outside party.
Since it was founded in 1946, Plenum has focused on scientific publications, particularly the English translations of Russian technical journals. The company, which has 300 employees, had 1988 sales of about $40 million. A Plenum spokesman said the company had total assets of $126 million for the period ended Sept. 30.
Plenum is no neophyte in the corporate takeover game.
In 1987, the publishing company made an unsuccessful bid to take over Arthur D. Little, a New York consulting company. Plenum abandoned the effort after Little’s board and controlling shareholder rejected the $128-million offer.
