Copyright Chicago Tribune 1987
Europe's leading maker of controls for heating and air conditioning has won a bidding war for Mark Controls Corp.'s MCC Powers subsidiary.
Landis & Gyr AG has agreed to pay $27.50 a share, or $132.5 million in cash, Mark Controls, based in north suburban Skokie, said Monday.
The boards of both companies must approve the deal.
The sale of its largest business will leave Mark Controls with an industrial valve business that the company said is expected to have a book value of $5 to $5.50 a share.
With its stock price hovering below $16 a share last May, Mark Controls put the Powers segment up for sale amid concern that the company was susceptible to a takeover at bargain prices.
What made the move so unusual was that no raider was in sight and Powers represented the bulk of Mark Controls' business. In the first half of 1987, Powers alone accounted for three-fourths of Mark Controls' sales and 88 percent of its operating profit.
The strategy worked, though. In trading Friday on the New York Stock Exchange, Mark Controls' stock closed at an all-time high of $28.62 a share, up $1.37 a share.
The price could rise further Tuesday given the $27.50-a-share offer and the remaining business' estimated book value of as much as $5.50 a share.
"We really have created a lot of value for Mark Controls' shareholders," Gary MacDougal, chairman, chief executive officer and president of Mark Controls, said Monday in a telephone interview.
"It does show the (stock) market wasn't very efficient," he said in reference to the company's low stock value earlier this year. "We're very pleased, and we think our shareholders will be very pleased."
In another unorthodox twist, MacDougal and Thomas C. Mattick, Mark Controls' vice president for finance, both plan to quit their full-time duties once the sale has been completed.
The U.S. subsidiary of Swiss-based Landis & Gyr will launch its tender offer for all Mark Control shares by Monday.
Just before the offer is completed, each share of Mark Controls will be exchanged for a share in the remaining company, temporarily called NewMark. After the deal has been closed, NewMark will be renamed Mark Controls.
Powers will be sold at a multiple of more than 16 times its earnings.
The purchase will give Landis & Gyr the U.S.'s third-largest maker and installer of building management systems, behind Minneapolis-based Honeywell Inc. and Milwaukee-based Johnson Controls Inc.
The systems control heating and air conditioning, security and fire safety in office buildings, hospitals, schools and factories.
MacDougal declined to discuss how many other bids had been received or the unsuccessful bidders' identities, but it is believed that as many as five companies sought Powers.
MacDougal, who owns a 5.2 percent stake in the company, personally is expected to walk away with about $6 million from the sale, severance payments and bonuses. He will remain chairman, though probably for only an interim period.
NewMark, the industrial valve business by itself, would have posted earnings from continuing operations of $650,000 in the first half of 1987, a 48 percent increase from $440,000 a year earlier. Sales would have totaled $28.9 million, compared with $27.5 million a year earlier.
Under terms of the deal, the remaining company will assume Mark Controls' long-term debt of $13.6 million. However, three planned divestitures-of Mark Controls' suburban Niles-based ball-valve business, major southern California land holdings and a minority investment in a pump company-are expected to leave NewMark debt-free.
In a prepared statement, William E. Bendix, the current head of the industrial valve business who will become NewMark's president and chief executive officer, said he expects earnings "to grow as a result of our ongoing cost reduction programs and improvements in its energy-related markets."