Scope Inc., the object of a $5 a share takeover bid by Lexicon Corp. of Fort Lauderdale, Fla., told its shareholders yesterday that a better offer may be at hand and urged them to resist the Lexicon offer.
Scope, based in Reston, specializes in the application of computer and signal-processing technology for industry and defense. Lexicon focuses on computer terminals and equipment for electronic signal processing.
In a letter dated Monday, Scope's chairman of the board, William C. Schaub, informed shareholders that the company's Employee Stock Ownership Plan may make a cash tender offer "at a price substantially higher" than Lexicon's offer and urged them not to sell their shares to Lexicon. Scope recently valued their shares at $5.41 each, based on an evaluation of the company's assets by an auditor.
According to Schaub's letter, the ESOP offer is contingent upon a "significant amount of additional equity financing" to raise the funds to pay for the shares. Scope plans to take out a bank loan and then lend those funds to its ESOP, pending approval by the ESOP trustee. The company will use the real estate equity of its building and its land to secure a loan as well as sell equity to a private company to raise capital, according to Scope President Edward C. Driese.
Lexicon, which currently holds 27 percent of Scope's stock, protested in a press release yesterday that this plan is "categorically unfair and detrimental to Scope shareholders" and will leave Scope's "equity position diluted by an anticipated equity offering and burdened by additional bank debt."
Lexicon must purchase 415,000 shares to gain control of the company. The ESOP owns 14 percent and must buy 455,000 shares to own more than 50 percent of the firm. Lexicon has set a deadline of midnight tonight for Scope shareholders to respond to its tender offer and would not say how much stock it has been able to buy. Lexicon originally offered securities and cash for the stock, but changed its offer to cash when Scope protested that the first offer was inadequate, according to Timothy J. Crow, Lexicon's executive vice president.
In the last quarter, Scope lost $140,000 on revenue of $3.57 million, which Driese attributes in part to heavy expenditures in research and development. "The benefits for shareholders would come as those new products and services went to market. We expect that investment to pay off," he said. He added that the company has suffered a "considerable slowdown" in the industrial products marketplace.
"We are genuinely anxious to remain independent as a company," Driese said.
"Lexicon believes that the combination of the two companies has a lot of advantages," said Lexicon Executive Vice President Timothy J. Crow. In a six-month period ending in February, Lexicon earned $229,000 on revenue of $3.3 million.
Scope closed at $4.75 bid yesterday, the same as the closing bid on Monday. Lexicon gained 6 cents to close at $2.63 per share.