Pacific Scientific Is Not Swayed by Suitor’s Offer

Calling an unwelcome suitor’s offer “inadequate,” Pacific Scientific Co. on Monday urged its shareholders to reject Kollmorgen Corp.’s $264-million hostile acquisition bid.

The Newport Beach electronic equipment maker also erected an expensive anti-takeover barrier in an effort to thwart competitor Kollmorgen’s advances. Pacific Scientific also said it has retained a financial advisor to consider alternatives, including selling to a “white knight” investor.

Investors sensing a potentially profitable battle for control of the company boosted Pacific Scientific’s stock price by $1.75 Monday to a 23-month high of $23.44, more than 14% above Kollmorgen’s $20.50 per-share offer.

The stock price “shows that the market has higher expectations” than Kollmorgen has bid, said Pacific Scientific Chairman Lester “Buck” Hill.

He declined to disclose what value Pacific Scientific’s own advisors have placed on the company, but said he believes that the current stock price is a more accurate gauge than Kollmorgen’s offer.

The company was first approached by Kollmorgen on Dec. 9, Hill said, and had responded with “a note that [said] we were diligently looking at their offer.” The note was sent Dec. 13.

Hill said company officials felt that they had been blindsided by Kollmorgen when they “read about the tender offer in the press” two days later. Kollmorgen, he said, apparently “was not willing to negotiate. I think they were trying to catch us during the holiday period and force this through.”

Kollmorgen Chairman Gideon Argov said, however, that he would be “open to negotiations without an preconditions. I would suggest Mr. Hill pick up the phone and give me a call.”

He also said Kollmorgen, which has filed a federal lawsuit to ensure that Pacific Scientific’s can vote on its proposal, now will ask the court to overturn the anti-takeover measures.

Hill said that Kollmorgen needs to secure the approval of 10% of Pacific Scientific’s shareholders to call a special stockholder meeting to vote on the tender offer. “The fact that they haven’t contacted us yet would seem to show that they haven’t got 10%,” Hill said.

Massachusetts-based Kollmorgen, which makes motors and controls, said it will continue to seek shareholder approval for the meeting.

Hill said that Pacific Scientific has “been undergoing a significant turnaround” in the past year. “We have a substantially new management team, new strategies, and we have identified core business that we intend to grow and other businesses that we intend to de-emphasize and sell.”

Pacific Scientific mainly designs and manufactures electronic components--called servo motors--that control movements of machine and instrument parts. Other divisions of the company make aircraft safety equipment and electronic measuring instruments.

Earlier this month, the company completed its purchase of an Irish company that also makes movement control systems. The acquisition “gives us a base for a European design center and gives us a manufacturing facility that serves the European market.”

Selling to another company in the midst of refocusing, Hill said, might not be the best tactic.

Still, he said that Pacific Scientific is “not opposed to considering a sale” if the price were right.

In response to Kollmorgen’s takeover effort, Pacific Scientific has hired BancAmerica Robertson Stephens as a financial advisor, Hill said. The investment banker is reviewing alternative strategies that could include buying back shares on the open market, or selling part or all of the company to other bidders.

Hill said at least 10 other parties have expressed interest in Pacific Scientific since Kollmorgen’s offer. He declined to identify them.

As part of the effort to block Kollmorgen, Pacific Scientific’s directors on Monday announced a so-called poison-pill plan that would boost the number of shares an unwelcome suitor would have to buy to acquire control of the company.

Directors also approved a management severance plan that would make it very expensive for a new owner to get rid of the company’s present top executives. A new owner would be required to pay 51 executives from 12 to 130 weeks of salary and bonuses if they were forced out of the company within two years of a change of control. Hill and two others would receive the most generous severance packages.

He said the pay plan was established so that company executives could focus on dealing with Kollmorgen and the potential sale of the company without worrying about their own jobs.

Bloomberg News contributed to this report.