Investor Group Halts Attempt to Buy Dataproducts

A New York investor group, which only a week ago said it was “highly confident” of obtaining the necessary cash to buy Dataproducts Corp., has instead thrown in the towel and abandoned its $190-million bid because it could not raise the money.

The announcement by DPC Acquisition Corp. last Friday that it was dropping its $10-a-share tender offer quietly ended the group’s yearlong effort to acquire the Woodland Hills manufacturer of computer printers. In October DPC, which already owns 7.5% of Dataproducts stock, made a tender offer to acquire the company.

But the “current disarray in the financial markets has made it impracticable” for DPC to obtain the financing, DPC said. DPC did not elaborate, but it appeared that the group ran into problems when the market for high-risk, high-yield “junk bonds” began collapsing last year. DPC planned to pay for the deal with its own cash, bank loans and junk bonds.

“The demand for junk bonds is not as great as it was,” Munawar Hidayatallah, one of DPC’s partners, said a week ago. He added, however, that he was “highly confident” the deal could still be completed.

But it was not to be. Dataproducts Chairman Jack C. Davis said “it’s gratifying that we can get away from this disruptive environment” now that DPC’s bid is over. He complained that the struggle was “disruptive to people’s lives and jobs. We’ve lost a lot of momentum and drive.”

DPC also dropped a separate effort to get the consent of Dataproducts’ other stockholders to oust the company’s directors and replace them with DPC’s nominees. Those nominees were committed to DPC’s plan of selling Dataproducts’ divisions piecemeal.

Despite its failure to buy the company, DPC nonetheless spawned big changes at Dataproducts, the nation’s biggest independent producer of computer printers that had sales of $353 million in its fiscal year that ended last March 25.

As DPC kept up the pressure, Dataproducts began a restructuring in September that will include the sale of its 22-acre headquarters property, the elimination of 400 manufacturing jobs in Woodland Hills (or 11% of its total work force) and a special dividend of about $2 a share. Dataproducts also put itself on the sales block and drew inquiries from 70 parties, but only DPC and one other, unidentified suitor made offers. Dataproducts rejected both as inadequate.

DPC has losses to show as well. The group, which first bought Dataproducts stock and approached the company about a takeover in late 1988, paid an average of nearly $13 a share for its Dataproducts stock, Hidayatallah has said. But the stock closed at $7.125 a share in American Stock Exchange composite trading Monday, giving DPC a current paper loss of $9 million.

The group said it still believes selling the company is “the best way” to enhance the value of Dataproducts’ shares, but it also urged the company to complete its restructuring, including the special dividend.

DPC also urged Dataproducts to sell its Dataproducts New England subsidiary, which makes printers for the military. Dataproducts had planned to sell the unit as part of its restructuring but has since raised doubts that it can be sold because of the slowdown in defense spending. Otherwise, Davis said, the company’s restructuring would proceed as planned.