Pacific Scientific Target of Hostile Takeover Offer

NEWPORT BEACH — Kollmorgen Corp., a Massachusetts maker of motors and controls, Monday made a hostile $20.50-a-share tender offer for its wayward industry peer, Pacific Scientific Co., sending the Orange County company’s stock soaring.

Kollmorgen said it made the cash-and-stock offer, valued at $264 million, after its efforts to merge the two companies were rebuffed by Pacific Scientific.

The Waltham, Mass., company announced that it is seeking a special shareholders’ meeting to consider ousting Pacific Scientific’s board and electing a new slate to evaluate its offer.

The company also said it filed suit Monday to make sure shareholders get the chance to vote on the proposal.

Gideon Argov, Kollmorgen’s chairman, chief executive and president, said that, although he hopes talks between the companies turn friendly, “it takes two to tango.”

A Pacific Scientific spokesman said the company’s board expects to issue a response by Friday and will advise shareholders in a statement today to “take no action” until then.

The board will also respond to Kollmorgen’s “unsolicited” call for shareholders to approve the holding of a special meeting, the spokesman said. The offer, set to expire Jan. 14, would give Pacific Scientific shareholders a 43% stake in a combined enterprise.

Pacific Scientific’s stock jumped more than 42% Monday to a 52-week high of $22, a gain of $6.56, in heavy trading on the New York Stock Exchange. Kollmorgen rose $1.62 to close at $18.50.

Argov said the two companies’ businesses in motors and controls--comprising nearly all of Kollmorgen and half of Pacific Scientific--would fit well. The product lines, which wind up powering everything from factory packaging machines to health club treadmills, generally complement each other, rather than overlap, he said.

He stressed, however, that Kollmorgen wouldn’t dispose of Pacific Scientific’s other businesses in Southern California, including lighting, detection devices for particles and aerospace products.

“We have no intention to sell them, close them, or run them into the ground. They are profitable, we’d be interested in having them grow,” he said.

The companies are about the same size: Pacific Scientific employs 2,400 and had sales last year of $294.8 million, while Kollmorgen’s staff of 2,000 had sales of $230.4 million.

Kollmorgen expects the combined companies would save millions through more efficient management and expanded sales.

“This is not about slashing and burning,” he said about possible job losses, should the companies merge. “This is about creating a company that’s better than either company alone.”

He said the effect on the companies’ combined work force would be “minimal overall.”

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Unfriendly Persuasion

Massachusetts-based Kollmorgen Corp. said it is launching a hostile takeover bid for Pacific Scientific Co. in Newport Beach after previous overtures for a friendly merger were rejected. The two companies:

Pacific Scientific Co.

Headquarters: Irvine

Business: Manufactures electrical and safety products

Chairman/CEO: Lester Hill

Employees: 2,400

1996 sales: $294.8 million

1996 profit: $200,000

Kollmorgen Corp.

Headquarters: Waltham, Mass.

Business: Technology products, including generators, motors, infrared imaging systems

Chairman/CEO: Gideon Argov

Employees: 2,000

1996 sales: $230.4 million

1996 profit: $8.9 million

Stock Surge

Takeover talk helped propel Pacific Scientific’s stock to twice its price a year ago. Monthly closing prices:

Dec. 1996: $11.00

Monday close: 22.00

Sources: Kollmorgen Corp., Bloomberg News