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Workers Acquire a Stake in Meade

Finance: Stock purchase for half of firm is made in conjunction with an investment bank.


IRVINE — Employees of Meade Instruments Corp. have teamed with an investment bank to acquire a 50% interest in their company, which claims to be the world's largest maker of telescopes for the retail and academic markets.

The stock purchase, made through a newly established employee stock ownership plan (ESOP), was arranged to provide increased cash for Meade's four original founders while giving the company's 170 workers a chance to participate in and profit from Meade's growth, said Martin Sarafa, the investment banker who handled the deal.

None of Meade's officers were available for comment. Sarafa would not disclose Meade's sales, the identities of the founding shareholders or financial information about the company or the stock purchase.

Meade, however, reportedly has increased its sales substantially since 1986, when it had 100 employees and annual revenue of $13 million.

Employee stock ownership plans are a popular way for owners of private companies to cash in part of their investment without surrendering control, said Fred Whittlesey, principal of Compensation and Performance Management Inc., a Newport Beach specialist in employee pay and performance programs.

ESOP plans also are used by publicly traded companies, he said, usually to link employee retirement benefits more closely to corporate performance or to reduce companies' cash contributions to retirement or other benefit plans.

Meade makes telescopes that sell for less than $100 in retail stores and other models that sell for tens of thousands of dollars at scientific supply houses that serve college and university astronomy departments.

The company's emphasis, though, is on high-quality telescopes for the serious amateur astronomer, Sarafa said.

The investment banker said the employee stock purchase will not affect Meade's management structure, although it does give employees enough votes to elect one of the company's five directors.

Meade was started in 1972. In 1986, the company's founders sold it to a St. Louis investment firm.

When the new owners failed to engineer a merger of Meade and Torrance-based competitor Celestron International in 1990, they lost interest in the business and in 1991 sold it back to the founders, Sarafa said.

"Since then, [the founders] have built the company back up and it is doing very well, and now they wanted to get some liquidity" without surrendering control of the company again, Sarafa said.

His firm, Houlihan Lokey Howard & Zukin, owns part of the 50% share sold by the founders under a financing agreement that gives the employees the right to acquire the investment bank's stake over time.

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