Takeover Offer Spurned by Diceon Electronics
Diceon Electronics Inc. on Wednesday spurned a $27.2-million hostile bid from Calvary Partners LP in San Diego, saying the offer was too low and didn’t reflect Diceon’s value in the market.
Diceon’s board of directors, making its first response to Calvary’s 3-week-old offer, also called the bid “highly conditional” and questioned the San Diego’s firm’s ability to finance the purchase price.
“The board does not believe that the offer price reflects the intrinsic value of Diceon today or the values that we believe our restructuring and strategic plan will, if successful, deliver in the future,” said Peter S. Jonas, vice chairman and executive vice president.
In a statement, Calvary noted that its cash offer of $5.25 a share for Diceon’s 5.1 million common shares outstanding is more than double the price that Diceon stock was trading at before the offer was announced.
“We question the success of Diceon’s ‘business strategy’ to the extent the company incurred a net loss of $2.3 million in fiscal 1989, and another loss of $10.2 million in fiscal 1990,” the Calvary statement said. “How has Diceon’s business strategy enhanced shareholder value in a stock that traded at $44.50 three years ago and has since fallen as low as $1.75 a share prior to the Calvary offer?”
James Arabia, Calvary’s president and a former Laguna Niguel securities broker, said it has no plans to change its offer and will proceed with its plans to nominate an alternative slate of directors at the company’s annual meeting.
Diceon is a manufacturer of sophisticated circuit boards used in the computer and telecommunications industries.
The company began a restructuring program in September, writing off $5 million in assets and laying off 225 of its 1,500 employees. The Irvine firm has also made changes in its manufacturing plants to speed production of higher-volume products.
Diceon said it obtained an opinion from the New York-based investment firm Kidder, Peabody & Co. that the Calvary offer was insufficient.
“It will be interesting to see how this unfolds,” said Gerald Fleming, analyst at Fahnestock & Co., a New York securities firm. “We’re telling our clients on a preliminary basis to tender their stock, provided Calvary has its financing.”
Fleming said Diceon’s restructuring has made the firm more competitive in the circuit board industry, where an inventory glut has caused prices to plummet. Although Diceon said the offer was low, Fleming said Calvary has drawn attention to Diceon’s stockpile of $25 million in cash and the possibility that money could be used to finance an acquisition.
Calvary has sued Diceon in Delaware court, seeking to change the Irvine firm’s bylaws to make it easier for the San Diego company to gain seats on Diceon’s board. Diceon has countersued, seeking to block the bylaw changes.
