Category Archives: Corporate finance

Zygo Agrees To Be Acquired By AMETEK For $364M

by Categorized: Corporate finance, Technology, Wall Street Date:

Zygo Corp., the Middlefield maker of precision optics and optical measuring equipment, said Friday it agreed to be purchased by AMETEK Inc. in a cash deal worth $364 million.

The $19.25 per share deal represents a 31 percent premium over Zygo’s Thursday close of $14.68, and a 27 percent bump from the company’s 6-month average trading price.

If the deal goes through as planned with a targeted closing in June, it would mark the end of independence for a Connecticut homegrown technology stalwart that was founded in 1970 and showed growth but was rarely a home run for investors. Zygo had $162 million in sales in 2013, with net income of $11.4 million.

The deal was valued at $280 million by the companies in a joint written statement, a reduction from the total market value due to Zygo’s $90 million in cash and lack of debt.

AMETEK, based in Berwyn., Pa., is a $3.6 billion-a-year maker of electronic instruments and electro-mechanical devices. The company, traded on the New York Stock Exchange, is a component of the Standard & Poor’s 500.

The companies did not say how the acquisition would affect Zygo’s more than 600 employees, and whether Zygo CEO Gary K. Willis would remain as an employee. In recent years the company has employed nearly 300 people at its Middlefield head office and plant; an updated number was not immediately available Friday.

Willis, who was CEO in the ’90s,  returned to run the company last October after the board ousted a 3-year CEO amid a sales slump — but the deal with AMETEK is hardly a desperation measure, as Zygo sales recovered nicely and its balance sheet is very strong.

It’s so strong, in fact, that at least six law firms announced Friday that they were investigating the deal on behalf of stockholders, saying Zygo’s board might have fetched more in an open auction of the company. Such moves are not uncommon when strong companies that have not seen sharp run-ups in the markets agree to sell themselves.

A rejection by shareholders would seem unlikely considering that Michael A. Kaufman, the Zygo chairman, whose fund controls 24 percent of the company, has agreed to vote his shares for the deal. Willis owned 111,646 shares, or less than 1 percent, as of the end of 2013.

The deal would allow AMETEK to expand its line of contact-based measurement devices to include Zygo’s opitical, non-contact line, the AMETEK CEO said in the written release.

Willis said AMETEK “shares our focus on delivering exceptional metrology and high end optics solutions to our global customers.”

The deal is nearly twice as large as an offer Zygo rejected in 2010, from a different Pennsylvania company, for $10 a share. Since then, Zygo has made three acquisitions. It now has operations in Tucson, Arizona; two locations in Californiia; Montreal; and overseas in Shanghai, Taiwan and Germany.

Zygo shares opened near the offer price on the Nasdaq exchange and by late afternoon were trading as high as $19.65, closing at $19.43 — higher than the offer, as some investors believed a better deal could emerge.

AMETEK shares were up 1.25 percent on a sharply down day for Wall Street.

 

Magellan Acquisition Highlights Pharmacy Management Profits

by Categorized: Corporate finance, Health Care, Insurance Date:

It really says something that the deal announced today by Magellan Health Services Inc. to buy Newport, R.I.-based CDMI LLC seems routine.

Consider the price Magellan is paying and what that tells us about the profits at CDMI, and at pharmacy management firms generally.

Avon-based Magellan will pay as much as $370 million for the pharma management firm that has health plans as clients. The base price is $205 million in cash and stock and the incentives total $165 million, based on profits and customer retention over the next three years.

With CDMI’s 2013 net revenues totaling $43 million, that’s 8.6 times sales — compared with Magellan’s own market value, at about 50 percent of sales.

And that means that if CDMI had a net profit last year of, say, 30 percent of sales, or $13 million `– a healthy figure — the full price Magellan could pay would translate to a price-to-earnings ratio of 28.6.  A net profit of 20 percent would mean Magellan is paying a whopping 43 times net earnings.

That compares with Magellan’s own value at 13 times trailing 12-month net profits, as the company earned $125 million in 2013.

So CDMI is hugely profitable and it’s not the only privately owned health management or underwriting consultancy that can make that claim. Last year the CEO of South Windsor-based Medical Risk Managers Inc., The No. 1 company among small employers for the Courant/Fox CT Top Workplace awards in 2013, said his firm was more profitable than Google — which had a 31 percent margin.

That’s a great industry for Connecticut to nurture and for companies such as Magellan and Aetna to acquire.

 

 

 

Tracking CEO Pay for Connecticut — An Up-And-Down Year At Top

by Categorized: Corporate finance, Wall Street, Wealth Date:

You may be angry about CEO pay in the tens of millions, or you may be proud to live in a land of opportunity — but you’re likely to react if you’re following reports of compensation from publicly traded companies, which come out this time of year as part of shareholder proxy forms.  This blog post compiles the reports for central Connecticut companies in one place.

Nolan Archibald, the $123 Million Man.

Nolan Archibald, the $123 Million Man.

Whatever you believe, it’s hard not to see many of these paydays as a national disgrace.

Check back often as I update the listing throughout proxy season, with links to stories in The Courant and other news outlets.

We’re still leading off with this one: Nolan Archibald, the former Stanley Black & Decker chairman, hauled in $123 million in 2013, one of the biggest payoffs in U.S. corporate history, and perhaps the biggest ever for a takeover ransom. The money was part of his 2010 deal to sell Black & Decker to Stanley.

Travelers’ Jay Fishman hauls in a $40 million catch but there’s plenty left over for the guys in Hartford.

Much less take-home in 2013 for Mark Bertolini at Aetna, but his promise of future stock totaled $28 million.

Thomas May of Northeast Utilities. Courant Photo

Thomas May of Northeast Utilities.
Courant Photo

NU transmits and distributes $11.8 million to CEO Thomas May in 2013, less than he earned in 2012 as his options exercises and stock vesting declined.

Recovery brings an $11.7 million package to The Hartford’s Liam McGee, with deferred compensation from 2010 coming due and higher share values for vested stock.

 

UTC's Louis Chênevert John Woike/The Hartford Courant

UTC’s Louis Chênevert
John Woike/The Hartford Courant

UTC’s board powered up Louis Chênevert’s 2013 package by 26 percent to $24.7 million, and it’s a good thing — since his CFO, Greg Hayes, cracked $20 million.

René Lerer, retired CEO of Magellan Health Services, navigates his way to a $17.8 million treasure including a $6 million bonus even though he was chairman throughout 2013, not CEO.

A slight decline to $8 million for George Aylward at high-flying Virtus.

At MetLife, West Hartford native and Hall High graduate Steven Kandarian brings in less than he did in 2012, $7.3 millio

Stanley CEO John F. Lundgren collected $28.6 million, a typical year for this cost-conscious, aggressive acquirer. (Same story as above by my colleague Brian Dowling.)

Cigna reported that its CEO, David Cordani, saw his total package mushroom to $17.8 million in 2013, as he has $11 million in stock vest last year.

Kaman’s Neal J. Keating sees his pay drop to $2.5 million, but he’ll really get closer to $4.9 million for 2013, when all is said and done.

Webster Bank’s Jim Smith endures a pay decline to $2.4 million, with no exercise of options of vesting of shares. Former president Jerry Plush, who resigned abruptly last fall, earned $3.2 million including a severance.

At People’s United Bank, Jack Barnes gains a $3.6 million package, an increase driven by vesting shares.

General Electric’s Jeffrey Immelt received sharply less in 2013, for a package totaling $11.3 million.

Hospitals aren’t public companies but the state compiles salary data for them, later in the year. Since hospital finances and layoffs are so much in the news, here’s last year’s story showing 18 Connecticut hospital executives pulling in at least $1 million in the prior year. We’re eager for an update.

Here is a March 15 Post by former Labor Secretary Robert Reich, the most widely read critic of U.S. CEO pay.
Chart from Reich post

Chart from Reich post

Here’s my 2013 overview for the 2012 pay year, with links to AFL-CIO’s “Executive Paywatch” database. Please note, AFL-CIO and others calculate CEO pay differently from The Courant. They count the current value of stocks and options in the year granted; we count stocks and options in the year when they are vested or exercised.

Legrand North America Hits $1 Billion in Sales

by Categorized: Corporate finance, Manufacturing Date:

Legrand North America, the West Hartford electrical and digital building systems manufacturer that includes the old Wiremold franchise, said late Friday it reached $1 billion in sales in 2013.

Worldwide sales for Limoges, France-based Legrand, a publicly traded company, were $5.9 billion last year, the company said.

When Legrand bought The Wiremold Co., which was family owned,  in 2000, the West Hartford manufacturer had $460 million in annual sales and a local staff of about 600.  Legrand moved its North American headquarters there two years later.

West Hartford employment remains over 500 people, including corporate, engineering and manufacturing, despite at least one significant layoff during the recession. Gains have come from organic growth, new products and acquisitions.

“Legrand is a company committed to innovation, and that core value has led to this remarkable milestone,” said John Selldorff, the regional CEO.

 

 

Investors Tell Morgan Stanley They’re Optimistic; More Fear In New York

by Categorized: Corporate finance, Wall Street, Wealth Date:

Investors across the nation with at least $100,000 in the markets told Morgan Stanley in a recent poll that they’re optimistic 2014 will bring gains, but those in the New York area, including Fairfield County, expressed more fear and caution.

Among about 3,000 respondents to the poll, by Morgan Stanley Wealth Management, “86 percent expect their investment portfolios to be ‘better’ or ‘the same’ at year-end, and 84 percent believe their financial well-being will be the same or better,” the company said.

The poll was taken during the fourth quarter of 2013, a bellwether year for stocks, before the declines of 2014.

Investors in the tri-state area were more concerned than those nationally about their families’ financial security, their ability to retire, having enough money for emergencies and market  volatility.  That makes sense, said Joseph Matthews, branch manager and first vice president at the Fairfield office of Morgan Stanley.

There is some familiarity bias associated with living in the tri-state area,” he said. “The people polled are more familiar with Wall Street.”

So, regardless of whether they actually anticipated the downturn that could become a full-on correction at the start of 2014, it’s less of a surprise to them, presumably.

As for types of stocks that might look good in 2014, technology firms led the way in the nation, at 79 percent, and in the tri-state area, at 72 percent, followed by energy, biotech and pharmaceuticals in slightly varying orders for the nation and the region. But other than pharmaceuticals, the sectors most prominent in the New York region, and especially in Connecticut, didn’t fare as well: finance, aerospace and insurance.

“The majority of investors nationwide said they were not knowledgeable alternative investments such as hedge funds, commodities and real estate although Tri-State region investors were more knowledgeable than other areas,” Morgan Stanley said in a written release.

The poll had a margin of error of plus or minus 3.9 percentage points in the nation and 6.7 percentage points in the region.

 

 

 

 

AT&T Selling Connecticut Business To Frontier

by Categorized: Corporate finance, Telecommunications Date:

AT&T has reached a deal to sell its wireline business in Connecticut to Frontier Communications for $2 billion in cash, ending a 15-year venture that led to thousands of job losses as the number of regular phone lines declined, technology improved and the company moved support operations elsewhere.

Stamford-based Frontier, which operates in 27 states, will take over the old Southern New England Telephone Co. business, which legally still has that name. The operations include 2,700 employees, 900,000 wireline telephone connections, 415,000 Internet connections and 180,000 U-verse video subscribers for a total of $1.25 billion in annual revenues, along with the network itself and a lease at AT&T’s New Haven offices.

Frontier will use the U-verse brand name for video services, but not for its bundled voice, video and Internet, as AT&T does. And, the Frontier president said in an interview, the acquisition will not mean higher prices or deep job cuts — although it will bring changes for customers.

The merger, announced separately by both companies, would close in late 2014 after regulators’ approval. Frontier will not cut overall employment numbers among the Connecticut employees it inherits, including 2,400 members of the Communications Workers of America, said Dan McCarthy, the Frontier president and chief operating officer. But he said that jobs will change, so some disruption will happen.

For a full version of this column, go to:

http://www.courant.com/business/hc-haar-snet-att-frontier-merger-20131217,0,2065086.column

 

 

STR Takes Extraordinary Measure As Partial Meltdown Continues

by Categorized: Corporate finance, Economic Development, Energy Date:

The long, slow meltdown at STR Holdings Inc. intensified Wednesday as the solar materials maker announced it was firing four ranking executives including Barry A. Morris, the chief operating officer.

This isn’t a shakeup. No, in a federal filing, the Enfield-based company said it’s eliminating the four positions “in connection with ongoing cost-reduction measures.” Also leaving next month are the vice president for human resources, the chief technology officer and the vice president for finance.

Remaining executives, including CEO Robert S. Yorgensen, will pick up the slack, the filing said.

Robert Yorgensen in 2010, better times for STR Holdings. Michael McAndrews/The Hartford Courant

Robert Yorgensen in 2010, better times for STR Holdings.
Michael McAndrews/The Hartford Courant

While some people might take pleasure in seeing a company eliminate jobs at the top rather than just laying off rank-and-file workers, this is not a good development for anyone. Cutting four top jobs to save money is the sort of measure that happens at the most desperate firms, and STR has posted operating losses totaling $8.7 million in the first two quarters of 2013 on sharply lower sales.

STR, in fact, had the ignoble distinction of trading at a market value below the level of its cash on hand for a few weeks this summer, according to Forbes. That means the market is basically saying the firm is worth more dead than alive.  On Wednesday, shares closed at $2.26, down just 2 cents, perhaps partly due to its strong, debt-free balance sheet and the fact that Wall Street likes cost-cutting.

Morris made $440,000 in 2012, according to federal filings, including value realized from stock and stock options. The salaries of the other executives were not listed.

The near-demise of STR proves the shakiness of picking winners — by investors and by public agencies that hand out loans, grants and tax credits — even in industries that apparently can’t fail.  There is no record of any backing by the state Department of Economic and Community Development, but in 2010, STR received federal tax credits totaling $829,000 as the government attempted to build up the solar industry.

STR, which had revenues of $288 million in 2008, went public at $10 a share in November, 2009. A year later the shares hit a high of $27.68, as STR, which makes encapsulation materials for solar panels, seemed impervious to the collapse of solar panel prices caused by China’s entry into the industry.

In 2010, with 290 employees in Connecticut, STR decided to move its local plant from Somers to East Windsor, expanding its work force further. But it’s been mostly downhill from there. STR has closed the plant, relying on operations in Malaysia and Spain, and in January of this year, announced it had lost its biggest customer, First Solar.

I couldn’t find the number of employees the company now has in Connecticut — some of the decline was due to the sale of a business a couple of years ago — and a spokesman did not return calls seeking comment.

Sales in the first half of this year fell below $20 million, but as with any public company CEO, Yorgensen  put his best spin on his Aug. 7 earnings release. “Despite continued headwinds, we have begun production-scale shipments of our next-gen EVA-based encapsulants to three new customers in China,” he said in the release.

Sturm, Ruger Leads CT Firms On Forbes Best Small Companies List

by Categorized: Corporate finance, Firearms, Management, Media Date:

What do gunmaker Sturm, Ruger & Co. and Annie’s, the organic food firm with the bunny mascot, have in common? Not much, you might think, but both companies with Connecticut ties are in the top 10 of the Forbes list of best performing small public companies.

Sturm, Ruger, based in the Southport section of Fairfield, comes in at No. 5 in the ranking, which is based on sales and profit growth over the last five years.

Annie’s, at No. 10, is based in Berkeley, Cal., but was founded by Canton native Annie Withey, who still grows and sells vegetables in Hampton and consults with the company.

Three other Connecticut companies also made the Forbes list, which ranked 100 publicly traded companies that have sales under $1 billion — solidly midsize by most standards. They are SS&C Technologies of Windsor, No. 28; TransAct Technologies of Hamden, No. 57; and FactSet Research Systems of Norwalk, No. 78.

Ruger has only its headquarters in its home state and recently announced a major manufacturing expansion in North Carolina. Over the last five years Ruger has ridden the gun wave, with its sales ballooning by 24 percent a year to $595 million and a massive 54 percent a year average gain in earnings per share.

At SS&C, the maker of software and systems for the financial services sector, with more than 400 employees in Windsor, founder and CEO Bill Stone moved to Florida late last year said this month he is considering moving company headquarters elsewhere.

For Nappier And Other Activists, Only A Moral Victory in Dimon Vote at JPMorgan Chase

by Categorized: Banking, Corporate finance, Management, Public finance Date:

Shareholder activists including state Treasurer Denise L. Nappier, who tried to force JPMorgan Chase Chairman and CEO Jamie Dimon to give up his chairman post, will have to be satisfied with a moral victory. Their bid fell short Tuesday at the company’s annual meeting.

Nappier, fiduciary of the $26 billion pension and trust funds, was among the ringleaders of the effort. Despite support from unions and other pension funds, the nonbinding vote to create an independent, non-employee chairman, was defeated with one-third of shares voting favoring the split.

The Connecticut funds hold 1.5 million JPMorgan shares, valued at $74.5 million as of April 30, and $38 million in JPMorgan debt, Nappier’s office said.

Management and the JPMorgan board, and of course, Dimon himself, had worked hard to defeat the measure, so the one-third rebuke is something of an accomplishment.  Still, a similar bid got 40 percent of shares a year ago, and some had hoped that the scandal of 2012, in which a London trader lost $6 billion, would lead to a larger vote for a split.

Nappier’s statement, in part:

“The Connecticut Retirement Plans and Trust Funds and many other shareholders realize that highly integrated companies such as JPMorgan Chase, in order to ensure long-term value, should be managed by a CEO overseeing the business, and an independent chairman leading the board in its oversight and evaluation of the CEO’s performance. Independent Board leadership is an important governance variable to ensure that the company looks beyond today’s profits to future growth and success.”

Nappier sent Suzanne Hopgood, a corporate governance expert, former chair and CEO of a New York Stock Exchange company, and chairwoman of the Capital Region Development Authority, to represent her office at the JPMorgan shareholder meeting in Tampa, Fla.

Questions by shareholders about the board operations lasted more than an hour, said Hopgood, who conveyed Nappier’s respect for Dimon and his abilities, but also her concerns “that he has two positions.”

“They are two very difficult, challenging jobs,” Hopgood said.

Three directors on the risk committee were re-elected with votes of between 53 percent and 59 percent, Hopgood said, which are low totals reflecting the shareholders’ concerns.

Nappier is a veteran activist in corporate governance, especially this issue — the splitting of the roles of chairman and CEO. She led a successful campaign to persuade The Walt Disney Co. to split the roles in 2005, a move the company later reversed and Nappier is trying to restore, but her bid was turned back in March.

As with all of her activism, Nappier argues that her interest is in shareholder returns, not political points.  Tuesday, she cited a 2012 report by GMI Ratings that said 5-year returns were 28 percent higher at companies with a separate CEO and board chair than at companies with a consolidated office.

Nappier’s office, citing shareholder advisory firm Institutional Shareholder Services, said 21.5 percent of Standard & Poor’s 500 firms had an independent chair in 2012, up from 18 percent two years earlier.

 

 

 

CEO Pay for 2012 in the U.S. and Connecticut: Part of a Broken System

by Categorized: Corporate finance, Economy, Labor, Wealth Date:

The AFL-CIO launched its annual database of CEO pay Monday, showing the average 2012 pay of CEOs at companies on the Standard & Poor’s 500 index was $12.3?million, or 354 times more than the average American worker earned.
The average of those S&P 500 CEOs — the 327 companies that have filed for 2012 so far — was down 5 percent from 2011. It fell, according to AFL-CIO’s Executive Paywatch web site, only because Apple CEO Timothy Cook made $378 million in 2011 in a one-time payout, compared with $4.2 million in 2012. Otherwise, the rate would have been up by 5?percent.

Click here for list of 66 Connecticut CEOs and their pay.

Click here for searchable database of CEO pay by company, industry and state.

Connecticut companies had an average CEO pay of $6.3 million in 2012 or 2011, whichever year is the latest available.
That figure compares with $5.1 million, the average of all CEOs among about 1,500 in the labor coalition’s database. The lowest was Chris Koliopoulos at Middlefield-based Zygo Corp., the optics and instrument maker who made $1.9 million last year.
Connecticut CEOs whose companies are on the S&P 500 index and have reported 2012 pay — 13 in all — out-earned their counterparts nationally, with an average of $13.6 million, compared with $12.3 million. The top was United Technologies Corp. CEO Louis Chênevert, at $27.6 million, followed closely by General Electric’s Jeffrey Immelt, at $25.8 million. Praxair’s Steven Angel pulled in $17.8 million while Aetna’s Mark Bertolini and Stanley Black & Decker’s John Lundgren each made a bit more than $13 million, and Cigna’s David M. Cordani came in at $12.9 million.

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