Firm Declines to Top Rival's Bid for Pacific

By BARBARA MARSH

Feb. 3, 1998 12 AM PT

TIMES STAFF WRITER

NEWPORT BEACH —

Kollmorgen Corp., a Massachusetts maker of motors and controls, dropped its hostile bid Monday for industry peer Pacific Scientific Co., shortly after Pacific announced that it agreed to be acquired by a firm that submitted a 27% higher offer.

Pacific said it accepted a bid of $30.25 a share from Danaher Corp., a Washington, D.C. maker of controls, tools and other industrial products that is 10 times the size of Kollmorgen.

Outgunned, Kollmorgen withdrew after pursuing Newport Beach-based Pacific Scientific for six months, first with friendly overtures, then with a predatory tender offer.

Gideon Argov, Kollmorgen’s chairman and chief executive, said “it wouldn’t have been in the interest of our shareholders” to top Danaher’s bid.

Danaher’s offer, valued at $460 million, includes an assumption of debt as well as the cash payment of $30.25 a share to shareholders.

In mid-December, Kollmorgen initially bid $20.50 a share for Pacific Scientific, then upped the offer to $23.75 a share last Friday.

Pacific Scientific stock rose $4.75 a share Monday to close at $29.88, while Danaher advanced $1.88 a share to $65 and Kollmorgen was up 50 cents a share to $19.25. All three stocks trade on the New York Stock Exchange.

Danaher emerged as the best solution to Pacific Scientific’s frantic attempts to avoid a shotgun marriage with Kollmorgen.

Pacific Scientific mulled, then rejected other options, such as a stock buyback, capital restructuring or sale of part of its business, said Lester “Buck” Hill, its chairman and chief executive. It received inquiries from 60 companies interested in buying the company or a piece of it, exchanged confidential information with more than 40, and narrowed the list of potential mates to three, including Danaher.

In a long meeting at company headquarters Saturday, its directors determined that Danaher’s offer was the best deal for shareholders, said Hill, adding that he had his first good night’s sleep in weeks on Sunday. Pacific Scientific decided to hook up with a company that is several times bigger, sells to many of the same customers and is well-liked by Pacific management.

If the sale proceeds, Hill expects that the 25 employees at Pacific Scientific’s corporate headquarters--including himself, his management team and support staff--will be out of jobs.

Hill was hired a year ago when the company faced losses and investor lawsuits stemming from the failure of plans to develop its Solium technology for dimming fluorescent bulbs. The company sold the Solium unit to a Chicago lighting firm in December.

Hill said he and three key execs--president David Schlotterbeck, chief financial officer Winston Hickman and controller Steven Yasbek--intend to sell themselves as a turnaround team for another local company in trouble.

Making light of his situation Monday, Hill concocted a possible want ad for the crew: “Executives out of job. Will work for stock appreciation.”

Hill said it’s likely that Danaher would retain the rest of Pacific’s work force of nearly 2,400 employees, including about 425 at other California operations in Yorba Linda, Santa Barbara, Sunnyvale and Duarte.

He said Pacific Scientific’s board voted generous severance packages for all employees at the company’s headquarters. Managers at other divisions also are eligible for severance terms, he said, but he noted it’s likely that Danaher will keep them on.

Danaher’s offer is subject to approval by shareholders and regulators. Shareholders may approve the deal by tendering at least 90% of the company’s stock. If fewer shares are tendered, the company will call a special meeting, at which the deal could be approved by a simple majority vote.

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Danaher-Pacific Scientific Deal

Danaher Corp. is buying Newport Beach-based Pacific Scientific. A look at the two firms:

DANAHER CORP.

* Headquarters: Washington, D.C.

* Business: Tools and components

* Status: Public

* Exchange: NYSE

* Chairman: Steven M. Rales

* President/CEO: George M. Sherman

* Employees: 11,600

* Annual sales: $2.1 billion