Linear buys Allstar, agrees to acquire IEI

Thursday, May 17, 2007

CARLSBAD, Calif.--Linear LLC, a wholly owned subsidiary of Nortek, continues to add to its lines of home electronics, engineered radio frequency products and access control products. Most recently, the company announced May 15 the acquisition of Allstar, a maker of gate and garage door operators, and the intent to acquire publicly traded International Electronics Inc., a manufacturer of electronic access control equipment and browser-managed security platforms.

IEI's board has approved the merger agreement and a tender offer for outstanding shares will commence on or before May 29. The move thwarts Risco's plans to buy the company via hostile takeover (search "Risco" and "IEI" at

"In our opinion, they are number one in standalone keypads," said Chuck Stevens, vice president of marketing for Linear. "We have a standalone keypad line, and we like our strategy and product there, but what IEI brings to it is a lot of variety ... If you look at their access control system, it's an IP-based system that has great flexibility and may even have applications that go beyond access control because of that flexibility."

Stevens said IEI's line "will not interfere or compete with the Linear line of access control product," which is largely centered on telephone entry systems.

He felt more security integrators would now be interested in Linear's product line as a whole, "and I would consider that to be one of the primary reasons for making the acquisition." However, citing Linear's history in past acquisitions, and there have been many over the past 14 years, of maintaining brand names and allowing organizations to run themselves autonomously, Stevens posited that IEI would largely continue as it is currently run. One possible change might be taking IEI's manufacturing overseas to Linear's Chinese plants.

The Allstar product line will "most definitely" be moved overseas, Stevens said, for a "lower-cost scenario." He said the acquisition expands the customer base for Linear's entry systems group, "and we [didn't] have a commercial garage door operator," which Allstar adds. "It's not a situation where we're just trading some dollars," he emphasized. "It will allow us to move in and work with their customer base, some of whom are already Linear customers, and it will give us a big opportunity to work with their OEM business."

The IEI buy effectively ends a hostile takeover bid by Israel-based access manufacturer Risco, which had recently offered, successively, $2.70, $3.50, and $4 a share for IEI. The IEI board each time (most recently on May 15) called for shareholders to reject the Risco offers, and was rewarded by Nortek/Linear with a price of $6.65 a share - nearly 350 percent higher than where the stock was trading just six months ago. With 1.75 million IEI shares outstanding, the purchase price is roughly $11.6 million. The company did just over $15 million in the trailing 12 months ending March 1 with EBITDA of roughly $500,000.

Terms of the Allstar deal were not released.