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Varian Stock Leaps on Takeover Rumors

November 06, 1986|From Staff and Wire Reports

Rumors that Varian Associates is a takeover target drove that company's stock price up almost 10% on Wednesday.

A Varian spokesman said the company knows of no reason for the speculation and is not in any discussions with a prospective buyer, nor has it received any buyout offer.

Shares of the Palo Alto company, which just last week reported a $14.9-million loss for its fiscal year ended Oct. 3, rose $2.625 to close at $29 in New York Stock Exchange composite trading on Wednesday.

The speculation centered on a takeover bid of $31 a share for Varian--which would put the offer at more than $660 million for the company--and mentioned United Technologies as a possible buyer.

Although some analysts note that Varian's weakened condition might make it vulnerable to a takeover, others say it also diminishes the company's desirability.

United Technologies declined to comment on the speculation, citing company policy.

Gary Simpson, vice president at Varian, said: "There's been no offer, and no conversations (about a possible combination) that I'm aware of. There have been no developments."

If such an offer should materialize, Varian officials might be inclined to reject it as too low. Simpson noted that recently some analysts have recommended Varian's stock and estimated its value in the coming months in the $45-a-share range.

But some analysts who were questioned on Wednesday about Varian's appeal were skeptical. Peter Aseritis, a defense analyst with E. F. Hutton, called Varian a "mismanaged company" with earnings that are a "never-ending horror story."

Varian derives about a third of its revenue from government defense work. Among its businesses are a semiconductor division and an electronic devices group.

The downturn in the semiconductor industry and defense budget cuts have taken their toll on the company. In July, Varian announced a restructuring and a series of cost-cutting moves that included a 5% work force reduction and 10% pay cuts for its management.

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