CompuDyne to go private in $60m deal

ANNAPOLIS, Md.--CompuDyne Corporation, a manufacturer of security products and a systems integrator working primarily in the corrections market, has agreed to be acquired by an investor group for $7 per share in cash, a 32 percent premium on the stock's price as of Aug. 8. With 8.44 million shares outstanding, the total purchase price would be roughly $60 million. The company has a market cap of roughly $56 million. The definitive purchase agreement must still be ratified by shareholders, but the board of directors has recommended the sale. Martin Roenigk, chairman and chief executive officer at CompuDyne, will leave the company following the sale, but he said the rest of upper management will remain, and he is very positive about the incoming investor group, which includes the Gores Group and Stuart Mackiernan, former corporate vice president of business development and president and chief executive officer of L-3 Satellite Networks at L-3 Communications. "Gores just raised $1.3 billion in new funds," Roenigk said, "so they've got lots of resources to grow the company. Our problem has been finding capital for funding growth opportunities." He said the expense of being a public company, especially following the Sarbanes-Oxley accounting reform of 2002, was onerous for CompuDyne, as it's a "relatively small company, but also relatively complicated," with a number of divisions and business segments. He said they did about $15 million in pure security integration business revenue in 2006. John Mack, chief executive officer at investment banking firm USBX, who consulted on the CompuDyne deal, said there has "been a bit of a backlash after Sar-Box that has had smaller public companies going private," but said CompuDyne was in a particularly onerous situation, as it was just above the threshold where the full requirements of Sarbanes-Oxley take hold. He doesn't see the reform hitting the security market any harder than other markets, but said the CompuDyne deal is indicative of a trend where "a good solid number of equity firms are interested in the [security] sector, and are taking the time to do their homework," with Gores being an example of such a firm. With $20 million in cash on the balance sheet, Roenigk said the sale wasn't imminently necessary, but was necessary for the future health of the company. As for his legacy following 13 years as chief executive, Roenigk said, "I think we did okay. You could always hope to do better. We took over in 1995, with $12 million in revenues and losing money. Now it's $150 million. When we started the stock was around a dollar. Now it's selling for $7. That's a pretty good return, but you could always be happier."