SAN DIEGO — A Minnesota company announced plans Thursday to make a friendly $12-per-share tender offer for Carlsbad-based Linear Corp. with the cooperation of Linear's chairman and president, its top two shareholders. Some outside shareholders, however, immediately criticized the possible tender offer as inadequate.
Interactive Technologies Inc. of North St. Paul, a manufacturer of home security devices, obtained a 30-day option to buy a combined total of 1,045,947 Linear shares, or 34% of the total outstanding, from Linear Chairman William Schanbacher and President Ted Farrell at $12 per share, or $12.5 million. The two men will be paid up to an additional $2 per share if Linear achieves certain sales and profit targets during fiscal 1988.
ITI Chairman Thomas Auth said his company, which is about one-third the size of Linear in sales, will make the same cash tender offer to the rest of Linear shareholders if ITI exercises its option.
Price Called Inadequate
Blaine Roberts, a La Jolla investment adviser who said he represents owners of 8.6% of Linear stock, said the price is inadequate based on Linear's anticipated earnings growth for fiscal 1987 and its bright prospects for fiscal 1988. A competing tender offer may well be presented to shareholders over the next few weeks, Roberts said.
Farrell, who founded Linear in 1961 and moved the company here from the Los Angeles area in 1984, said he is selling his stock to pursue other business interests. He will stay with Linear only through the transition period of its merger with ITI.
Linear stock closed up $1 at $11.875 per share in over-the-counter trading Thursday.
Linear manufactures wireless home security devices and garage door openers in plants in Carlsbad and Hong Kong. Revenues have grown sharply this fiscal year, due mainly to a marketing arrangement for its home security devices signed last year with Schlage Lock Co., a unit of Ingersoll Rand Co. Linear has 875 employees.
For the nine months ended Feb. 28, Linear Corp. reported net income of $2.3 million, or 77 cents per share, on sales of $41.9 million, contrasted with a net loss of $183,000, or six cents per share, on revenues of $30.3 million reported over the same period last year.
Roberts said he expects Linear to post a profit of about $1.08 per share on sales of $58 million for the full year ending May 31. Profits could go as high as $1.45 per share in 1988, he said, making ITI's possible $12 tender offer inadequate on a price-earnings basis.
Another San Diego-based securities analyst who asked not to be identified disagreed, saying the price is fair in light of Linear's dependence on its relationship with Schlage.
Art Hall, president of A.E. Hall & Co., an investment firm based in Minden, Nev., and the owner of 10,000 Linear shares, criticized ITI's possible tender offer, saying shareholders would do better if the stock "were held up at an open auction and not (sold) through a sweetheart deal."
"I'm selling $6 million worth of stock in this, and I wouldn't be doing it if I didn't think it was fair," said Farrell, who owns about half the shares being sold to ITI. Farrell, 59, said there would be no layoffs at Linear as a result of the merger.
Linear stock had mostly languished after the company went public in 1983 at $15 per share, Roberts said, falling below $5 per share early last year. The Schlage marketing arrangement, which has resulted in Linear home alarms being sold in Target, Home Club and other chains, has helped push the stock price up, he said.