SAN DIEGO — Maxwell Laboratories' rejection of JAYCOR's uninvited $17-per-share merger bid probably opened the door to more bids for the San Diego-based company that develops high-tech products for military and commercial markets, industry analysts said Friday.
Maxwell's board of directors Thursday rejected JAYCOR's $17 cash bid as "inadequate and otherwise on unacceptable terms and not in the best interests of the stockholders and the company." Maxwell closed up $1.25 at $15.75 Friday. It reported a $14.20-a-share book value on April 30.
Analysts suggested that shareholder pressure would force Maxwell's board to seriously consider a bid of $20 a share or above, and those analysts seemed confident that more bids are likely.
"Once the genie is out of the bottle, there are always more bids," said Larry Selwitz, a Newport Beach-based industry analyst with Cruttenden & Co., who suggested that Maxwell's board would have to "seriously consider" a bid of $20 or more a share.
"In Wall Street jargon, the company is now 'in play,' " according to Irving Katz, director of research for Thomas Green/San Diego Securities. "The question is whether (Maxwell's board) . . . can reject someone who comes in with a respectable offer."
Maxwell designs, develops and manufactures pulsed-power equipment and performs research and computer-based analysis for defense, energy, industrial and environmental markets. Maxwell reported $1.3 million in net income and $29.3 million in sales for the six-month period ended Jan. 31. Its order backlog on Jan. 31 was $109 million.
In November, Maxwell announced the formation of FoodCo, a majority-owned subsidiary that boasts three multibillion-dollar corporations as minority-interest partners. The highly secretive operation is believed to be using Maxwell's pulsed-power technology for food-processing and food-packaging applications.
JAYCOR Vice President E.S. Hamilton on Friday declined to comment on his company's bid for Maxwell.
JAYCOR, a privately held, San Diego-based defense contractor, reported about $65 million in 1988 revenue. JAYCOR provides scientific and engineering support services, largely to military customers, Hamilton said.
About 150 of its 800 employees are in San Diego. Nearly 500 employees work in the Washington area and the rest work at smaller offices around the country. JAYCOR, which was founded in 1975, is principally owned by its employees and ex-employees, Hamilton said.
Maxwell Vice President Sean M. Maloy on Friday said that JAYCOR's bid conflicted with the company's "aggressive growth strategy," which includes the possible acquisition of other companies. Being acquired now would disrupt that strategy, Maloy said.
Maxwell, a publicly traded company, in recent years has added several anti-takeover defenses. It adopted a fair-price provision that forces possible suitors to negotiate a takeover with its board of directors. Maxwell also staggered the terms of its board members, which could make it more difficult for a hostile suitor to gain control of the company.
Still, Selwitz maintained that Maxwell is ripe for a merger or an acquisition because "management has less than 10% of outstanding shares, the stock has been selling at below book value, and it's a company that's on the leading edge of its technology. . . . I see some awesome potential in the military and commercial arenas."
Katz suggested that Maxwell's board "could easily have rejected JAYCOR's initial bid because "nobody really knows much about (JAYCOR), there's no indication that they've tried to accumulate Maxwell stock, and you don't even know if they could arrange financing to carry it off."
However, "Maxwell's next shareholder meeting will look like some kind of embassy riot if they turn down something above $20 a share," Selwitz said.
Maxwell is a leader in the development of pulsed-power devices that have the potential to be used in many military and commercial products. Maxwell, for example, has used government contracts to research high-energy pulsed-power systems that may one day be used to fire armor-piercing shells or power space rockets.
The U. S. Environmental Protection Agency has awarded Maxwell a contract to use its pulsed-power technology to evaluate the content of hazardous waste.
Late last year, Maxwell won a $20-million contract from Louisiana State University to build a massive X-ray light source that will be used to design and build ultra-high-density microelectronic devices.