TRC Board Adopts Poison Pill Plan After Unsolicited Offer from Coleman Cable

Jan. 28, 2011
Coleman Cable, Waukegan, Ill., said it has made an unsolicited offer to buy Technology Research Corp. (TRC), Clearwater, Fla., maker of electrical safety products, for $5.50 per share

Coleman Cable, Waukegan, Ill., said it has made an unsolicited offer to buy Technology Research Corp. (TRC), Clearwater, Fla., maker of electrical safety products, for $5.50 per share. TRC in turn has adopted a shareholder rights plan “to protect the interests of the company and all its shareholders.”

“We have attempted to engage TRC’s board of directors on a number of occasions and we are disappointed that rather than engaging in constructive dialogue with Coleman, TRC’s board instead adopted a poison pill to block a transaction that is clearly friendly to its shareholders,” said Gary Yetman, president and CEO of Coleman. “Given the historically low trading volume of TRC’s stock, we firmly believe that TRC shareholders will find the certainty of a cash offer — at a premium of 46 percent to the average closing share price for the 20 trading days before our offer was made public — very attractive.”

In a Jan. 18 release, TRC said it “adopted the rights plan, consistent with its responsibilities to shareholders, to better assure that the company has time to properly evaluate and respond to this indication of interest in relation to the company’s prospects and opportunities.” The board cautioned shareholders that there was “no need to take any action at this time with respect to the indication of interest from Coleman Cable.”

Owen Farren, president and chief executive of TRC, said in the TRC release, “The board unanimously believes the adoption of the short-term rights plan is appropriate at this time. The board will consider this expression of interest consistent with its responsibilities to the company and all its shareholders.”

The rights plan assigns one right per outstanding share of TRC common stock for a term of two years with an exercise price of $15 per share if a person or group moves to acquire 15 percent or more of the company’s stock. If they become exercisable, the rights entitle the holder of each right to purchase for the exercise price a number of shares of TRC common stock with a market value of twice the exercise price, subject to certain adjustments.

From April 2010 through Aug. 2010, Coleman acquired 323,710 shares of TRC’s common stock in a series of open market transactions, representing roughly five percent of TRC’s outstanding shares as reported on the company’s quarterly report for the period ending Sept. 30, 2010.

Coleman said it has made numerous efforts to engage TRC’s board and management in negotiations to agree to a friendly transaction beginning with a letter sent to TRC’s Farren on Dec. 2, 2010, which proposed an offer price of $5.00 to $5.50 per share. On Jan. 3, 2011, TRC sent a letter to Coleman indicating that TRC was not interested in discussing Coleman’s proposal. On Jan. 5, 2011, Coleman sent a letter to TRC reiterating its interest in discussing a possible transaction and requesting a response by Jan. 12. After TRC did not respond to this letter, on Jan. 14 Coleman communicated to TRC a revised offer price of $5.50 per share. As of Jan. 18, according to Coleman, TRC had refused to enter into any dialogue with Coleman to explore the merits and potential terms of a transaction.

Coleman said its offer is not subject to any financing conditions and would be funded from cash on hand and its existing borrowing facilities. Coleman’s offer is subject to customary due diligence, TRC’s board of directors redeeming or invalidating its poison pill shareholder rights plan, and the negotiation of a mutually acceptable definitive merger agreement.

Coleman Cable is a manufacturer of electrical and electronic wire and cable products for the electrical, security, sound, telecommunications, commercial, industrial and automotive markets. The company has created or acquired a number of wire and cable brands including Seoprene, Royal, Baron, Copperfield, Woods and Yellow Jacket. It reported revenues in 2009 of just over $504 million.

TRC provides engineered solutions for applications involving power management and control, intelligent battery systems technology and electrical safety products, most employing the company’s ground-fault sensing technology. The company also supplies power monitors and control equipment to the United States military and its prime contractors. TRC reported revenues in 2010 of $34.8 million and net income of $2.8 million.

The company is pegging future growth on AC-to-DC conversion technologies, including expanding its military-spec inverter product lines to serve commercial and renewable energy applications; battery-charging technology supported by its acquisition of Patco Electronics in March 2010; development of microprocessor-based communication and power management products for intelligent switching of electrical devices in specialty vehicles and other transportation applications; and intelligent power distribution systems for stand-alone and microgrid applications, according to its 2010 annual report.

The two companies’ product lines would overlap in a few areas, primarily in GFCI-protected portable cordsets.