RISCO initiates hostile takeover of IEI

SSN Staff  - 
Thursday, March 15, 2007

CANTON, Mass.—Risco, an Israeli firm doing business in the United States as Rokonet Industries USA that makes access control and intrusion hardware and system management software, has tendered an offer to purchase access control manufacturer International Electronics (known as IEI) for $3.50 a share. It is a follow up to an October 31 offer of $2.70 a share. IEI’s board of directors said it would file a recommendation statement with the SEC on or before March 16.
In a letter dated March 6, Risco claimed it “has attempted to discuss an amicable transaction with IEI management on several occasions ... [but] IEI’s refusal to negotiate with us in good faith has left us no choice but to commence our current offer at this time.”
IEI senior management was not immediately available for comment.
On March 7, the board of directors acknowledged the “unsolicited cash tender offer” and gave the timetable for the recommendation. “IEI shareholders are urged to defer making any determination with respect to the tender offer until they have been advised of the board’s position,” the release read.
The Risco letter was fairly strenuous. It listed IEI net losses in 12 of the last 13 quarters, IEI’s delisting from NASDAQ, the illiquidity of IEI’s stock and a stock price that “has been largely flat or trending downward for several years” as reasons that IEI shareholders should accept Risco’s $3.50 offer. “Our proposal represents an outstanding opportunity to IEI, its board of directors, stockholders and employees at a critical juncture,” the letter read. “While IEI may be working hard to execute its strategic plan, there is little evidence that the plan promises to deliver stockholders a return on their investment approaching the immediate return our offer will provide.”
As of March 14, IEI’s stock was trading at $3.45, but that may be attributable to the tender offer, and it has been as low as $1.30 over the past 52 weeks. In the most recent quarter, IEI’s book price was $3.15.
With 1.74 million shares outstanding, 500 owned by Risco currently, the $3.50 offer represents a cash price of just over $6 million.
As part of its tender offer, Risco has also demanded, under Massachusetts law, that IEI convene a special meeting of its stockholders to authorize voting rights, along with a stockholder list and inspection rights. “If the IEI board of directors and management continue to try to obstruct our offer, we are prepared to take all steps necessary to ensure that IEI stockholders have the opportunity to benefit from it,” the letter read.