Dataproducts buys back stock after takeover fails.

Dataproducts buys back stock after takeover fails

New York group couldn't obtain financing for deal

Dataproducts Corp., a Woodland Hills-based computer printer manufacturer that until very recently was a potential hostile takeover subject, last week completed a cash tender offer that repurchased 22 percent of its outstanding common stock.

As a result of the offer, which brought the book value of Dataproducts stock down to $8.64 a share, the stock reached a new 52-week low of $4.875 -- in contrast to its 52-week high of $17.50 when DPC Acquisition Corp. still had an unsolicited takeover offer outstanding. DPC, a partnership headed by John K. Castle, former president of Donaldson, Lufkin & Jenrette, in January formally withdrew its takeover offer because "they were unable to obtain financing, which is what we'd been saying for the past 14 months," said Dataproducts Chairman and CEO Jack Davis.

Three days after DPC withdrew its offer, Dataproducts reported a third-quarter loss of $3 million, or 21 cents a share, on revenues of $79 million. The company concurrently announced it completed the sale of its Warner Center offices in Woodland Hills for $60 million and would use the proceeds to start a cash tender offer to buy 4 million shares of its outstanding common stock at $10 a share.

The sale and leaseback deal was part of a restructuring plan Dataproducts announced last September. In the plan, the proceeds of the sale were earmarked for a cash dividend, but the board changed its mind in January. Davis said a tender offer would give shareholders a choice: either to sell their stock at a premium or increase the proportion of their ownership.

The tender offer comes at a crucial time for Dataproducts, a company that since the 1985 computer recession has had alternately losing years.

For fiscal 1986, the company reported a $27 million loss on revenues of $354 million in an annual report encased in yellow, raincoat-like covers with a photograph of senior management wearing raincoats. "To everyone who helped us weather the storm," read the report.

The annual report also introduced Davis, who had been senior vice president of information systems at a $2.2 billion electronic equipment manufacturer, Harris Corp. of Melbourne, Fla. Davis had been chosen to replace Graham Tyson, who helped found the company and whose salary was $225,000 a year. For a salary of nearly $500,000 a year, Davis appeared to weather the storm in fiscal 1987, when the company reported a profit of $9 million, but not in 1988, when it suffered a $20 million loss on revenues of $345 million. Davis attributed that loss to "important changes" that also brought a Fiscal 1989 profit of $3.8 million, he wrote in the annual report.

For the first nine months of fiscal 1990 ended in December, however, Dataproducts has lost a total of $12 million, and Davis is still at the helm of the company.

"I presume the board still thinks he can turn the company around," said an analyst, who requested anonymity. "They're still giving him the chance. With the new restructuring, they'll probably pull through, but it may take a few quarters."

The analyst attributed the company's misfortunes to heavy competition and thin margins in the computer printer business: "The business in general is very sluggish -- the company at best is marginally profitable."

The laser printer business, a growth area in printers, is dominated by Japanese manufacturers who hold patents on major components of laser printing, said the analyst. Somewhat optimistic, however, the analyst predicted: "Dataproducts stock will go up in the long-term, in two to three quarters."

"We look forward to moving ahead without the uncertainty, disruptions and expenses of the last 15 months," wrote Davis in January, alluding to lawsuits filed in connection with the attempted takeover.

In late 1988, the company's takeover troubles began when DPC, an 8 percent shareholder of Dataproducts, filed takeover documents with the Securities and Exchange Commission.

But Castle, who was credited with making Donaldson, Lufkin & Jenrette the most consistently profitable firm on Wall Street until it was acquired in 1984, was unable to get financing for the proposals. Nor, apparently, was his partner, Munawar Hidayatallah, president of Crescott Inc., a New York-based food service company.