In a new sign of corporate bargain-hunting following the stock market plunge, Sequa Corp., a New York-based conglomerate, yesterday offered to acquire Atlantic Research Corp. for more than $275 million in cash -- a figure some analysts say is well below the price the Alexandria-based company would have commanded only a few weeks ago.
Analysts cited the surprise tender offer yesterday as one of a number of recent cases of corporate takeover activity apparently spurred or sped up by the Oct. 19 stock market drop. The common theme, said analysts, is that the drop in stock prices has created new opportunities for acquisitions at a discount.
"Since the crash in the market, everything has changed," said Eliot H. Benson, research director at Ferris & Co. "I think we'll be seeing a resurgence of deals. Certainly there's enough opportunities out there."
Sequa's offer yesterday to buy Atlantic Research, one of the Washington area's largest defense contractors, is one example. Sequa, which already owns about 1.7 million shares of Atlantic Research, or about 18.5 percent of the company, offered to buy all of Atlantic Research's outstanding stock for $30 a share.
May O'Leary, an analyst who follows Atlantic Research for Baker, Watts & Co., estimates the value of its stock at between $35 and $40 a share based on its future earnings prospects. But since the Oct. 19 market plunge, Atlantic Research's stock price has dropped below $20 a share. It was selling for $19 yesterday, before the Sequa announcement set off a buying spree that sent prices soaring to $28.50 a share.
The offer appeared to catch the company off guard. Only last month, company President William H. Borten was publicly expressing relief that Sequa had bought into ARC, buying up the outstanding shares of another hostile bidder, Clabir Corp. On Oct. 7, Borten said that Sequa "has confirmed to us that their purchase of Atlantic Research stock is strictly an investment."
Sequa, formerly Sun Chemical Corp., is a $1.2 billion-a-year manufacturing and transportation company with interests in gas turbines, jet engines, military electronics, specialty chemicals and women's apparel.
In a statement yesterday, Sequa said that its offer was conditioned on the Atlantic Research board eliminating a so-called "poison pill" stock purchase right provision it had erected last year as a defense against a hostile bidder. But Atlantic Research's initial response appeared cool.
Calling the Sequa proposal an "unsolicited proposal," it said its board would evaluate the $30 a share offer and advise shareholders of its position "shortly." In the meantime, the company said, "Atlantic Research strongly urges its shareholders to defer making any decision with respect to the proposal."
"We're seeing a lot more interest in companies now that the stock market has come down so far," said Daniel J. Good, a managing director and head of merchant banking for Shearson Lehman Brothers Inc. The same low prices that have brought bargain-hunting individual investors back into the market have also prompted renewed interest in acquisitions, creating a buyer's market.
So far this week, Henley Group Inc. and Olympia & York Developments Ltd. disclosed that they have acquired additional stock in Santa Fe Southern Pacific Corp. and have made competing bids to take over the railroad and natural resources firm.
In another local example, DynCorp., a technology and services company based in McLean, Monday accepted a $23 a share buyout offer from a group led by its president. Only a month ago, the company turned down a $25 a share bid from another group.
On the same day, Florida investor Paul A. Bilzerian made a $1.1 billion unsolicited offer for The Singer Co., the first major hostile takeover attempt since the market's plunge.
After the stock market collapse, several deals fell through, and many analysts were quick to declare that the Wall Street takeover boom had stalled. Washington's Haft family dropped its $6.3 billion offer for Dayton Hudson Corp. and proposed leveraged buyouts by GAF Inc. and Trans World Airlines Inc. were canceled, amid new concerns over financing, turmoil in the markets and proposed legislation on Capitol Hill to limit interest deductions on takeovers to $5 million a year.
Some of those concerns still apply, although Wall Street fears of congressional limits on borrowing for takeovers have eased. Moreover, it has become increasingly clear that the market collapse can work both ways.