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Cimco Adopts a 'Poison Pill' to Stop Hostile Takeover Bids

December 08, 1992|MICHAEL FLAGG | TIMES STAFF WRITER

COSTA MESA — Cimco Inc., a maker of plastic parts for business machines and computers, said Monday that it had adopted a "poison pill" to prevent hostile takeovers.

The company declined to say if it is under attack by a hostile suitor. The move puzzled analysts who follow the stock; they said the company is an unlikely target for a takeover.

"It's a fine company," said Martin J. Cosgrove, an analyst at the Wedbush Morgan Securities brokerage in Los Angeles, "but it's not at the top of anybody's takeover list."

And the company's stock has been relatively quiet; there have been no big, unexplained purchases recently. It has traded at between $6.50 and $9.25 a share on the over-the-counter market for a year, said Steve DeLuca, an analyst at Cruttenden & Co., an investment banking firm in Irvine. The stock closed unchanged Monday at $8.25.

At that price, the company is hardly the sort of undervalued stock that sometimes attracts corporate sharks, said Cosgrove, the Wedbush Morgan analyst.

"It's not selling at a deep enough discount to make it a compelling value," he said.

"It has a good name in its particular industry, but it's not a franchise name."

Poison pills, a popular corporate defense during the takeover boom of the 1980s, are designed to make buying all a company's stock prohibitively expensive for a potential buyer.

In Cimco's case, if a raider were to buy 20% or more of the company's stock, Cimco would issue more stock, which the existing shareholders could purchase at half the current market price.

A press release the company issued Monday merely says the plan "is intended to provide the board with additional time and bargaining power to protect stockholder interests in the event of an unsolicited takeover bid."

The company recently reported profit of $279,408 on sales of $19.2 million for the quarter ending Oct. 31, up from profits of $77,000 on sales of $17.5 million in the same period last year.

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