Scientific Technologies (NASDAQ:STIZ)
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Scientific Technologies Inc. ("STI" or the "Company")
(NASDAQ:STIZ) announced today that it had entered into a definitive
agreement with Omron Corporation ("Omron") whereby Omron will acquire
the Safety Products Group ("SPG") of STI. STI has also separately
entered into an agreement to sell its Automation Product Group ("APG")
to a new company formed by members of the Lazzara family who currently
serve as officers and directors of STI.
The estimated value of the transaction is comprised of $94 million
for SPG, $6 million for APG, plus an estimate for certain corporate
assets, including cash net of certain liabilities and estimated
transaction related expenses. In total, STI estimates that the
transactions would value the equity of the company at approximately
$107 million, or approximately $10.76 per basic share.
The Board of Directors of STI has unanimously approved STI's entry
into the merger agreement with Omron and will recommend that the
shareholders of STI vote to approve the merger. The closing of the
transaction is subject to customary conditions, including regulatory
review, shareholder approval and the lack of a material adverse change
with respect to the company's SPG business.
The sale of the SPG business to Omron is conditioned upon a
separate sale of the Company's APG business. Pursuant to a process
managed by an independent committee of STI's Board of Directors, the
Company has agreed to sell the APG business to a new company formed by
the Lazzara family. As part of its agreement to sell APG, the
independent committee has contractually reserved the right to consider
superior offers for the APG business.
The closing of each transaction is expected to occur by the end of
the third calendar quarter of 2006 and the agreements may be
terminated if a closing has not occurred by September 30, 2006.
Mr. Joseph J. Lazzara, President and Chief Executive Officer of
STI, said, "We are very pleased to have come to this agreement with
Omron Corporation. We believe the Company will benefit enormously from
the global reach and substantial capital and technology resources that
Omron brings to STI. Our customers will benefit from having the best,
most technologically advanced suite of industrial safety and factory
automation products from which to choose."
"In addition, Omron's global presence will better enable the
Company to bring its products to customers on a worldwide basis.
Furthermore, this is clearly a win- win transaction, as STI's
leadership position in the safety market and our extensive regional
sales and distribution channels in North America will further enhance
Omron's reach within this important market. We believe this
transaction enhances the ability of the Company to live up to its
motto of 'making people safe and productive' on a global basis."
After the closing of the merger, STI will be part of Omron
Management Center of America, Inc., Omron's North American holding
company. It will also report business and financial results through
Omron Electronics LLC to Omron's Industrial Automation business, the
largest business segment within Omron.
Mr. Fumio Tateisi, Executive Vice President of Omron Corporation
and President of Omron's Industrial Automation Business, said,
"Together, Omron and STI will create a global safety equipment
supplier of safety, sensing and control technologies that satisfies
customers' demands for not just labor productivity but also product
quality, employee safety, and environmental friendliness. By acquiring
the Safety Products Group of STI, we will be able to offer a wider
range of cutting-edge safety products and consultancy services to our
customers."
The operations of STI's Safety Products Group will remain in
Fremont and Anaheim, California.
Mr. Lazzara added, "From our modest beginnings, STI has grown to
become the leading provider of safety automation products and services
in North America. We are very proud of our accomplishments, but
realize that as our markets become more global, STI would be able to
achieve greater success if it could become part of a larger, global
automation supplier organization. Omron is that organization."
Mr. Lazzara also said, "In addition, it has become increasingly
more expensive to remain a small public company, particularly with the
high costs associated with the regulatory environment post-Sarbanes
Oxley. For example, we estimate that it costs us more than $1 million
dollars a year just to be a public company, money that we cannot use
for other purposes, such as investing in new products and services and
growing our company."
Mr. Lazzara concluded, "Accordingly, when we received a proposal
from a large strategic buyer last fall, we engaged financial and legal
advisors to analyze our strategic alternatives with a goal to maximize
value for all shareholders. We are pleased that this competitive
process resulted in a value that we estimate will provide shareholders
a 40% premium over the stock price as of the end of March and a 30%
premium over the average closing stock price over the past 30 trading
days."
As part of the merger, Omron has made it a condition that the
Automation Products Group, based in Logan, Utah, be sold separately.
Accordingly, representatives of the Lazzara family have agreed to
purchase APG for $6 million. The Lazzara family also controls
Scientific Technology Inc., which owns 86% of STI. An independent
committee of the STI Board of Directors was formed, consisting of
independent directors unrelated to the Lazzara family, to oversee the
sale of the APG business. Using the company's financial advisor as
agent, a number of proposals were solicited to acquire the APG
business with the Lazzara family participating in the bidding process
on an arms-length basis. The independent committee evaluated all
offers received and reached the determination that the offer from the
Lazzara family was superior in terms of the value offered for the APG
business. The definitive agreement for the APG business provides that
the independent committee may consider superior offers for the APG
business; however, no assurances can be made that a superior offer for
the APG business can be obtained on acceptable terms. Omron has made
it a condition to the closing of the merger not only that the APG
business be sold but also that any sale of the APG business be
completed on a "where is, as is" basis.
The terms of the transaction are outlined in detail in the stock
purchase agreement between Omron and Scientific Technology Inc. and
the merger agreement between Omron and STI. The terms of the sale of
the APG business are outlined in detail in the APG stock and asset
purchase agreement. These agreements will be filed with the SEC and
incorporated by reference in proxy statements and other documents to
be filed with the SEC regarding the merger.
Wilson Sonsini Goodrich & Rosati, Professional Corporation acted
as legal advisor and The Spartan Group LLC acted as financial advisor
to STI.
About Omron Corporation
Omron Corporation, headquartered in Kyoto, Japan, is a global
leader in the field of automation with approximately $6 billion in
annual revenues. Established in 1933 and headed by President and CEO
Hisao Sakuta, Omron has more than 26,000 employees in 35 countries
working to provide products and services to customers in a variety of
fields including industrial automation, electronic components, social
systems (ticket gate machines, ticket vending machines and traffic
control) and healthcare. Further information on Omron is located at
www.omron.com.
About Scientific Technologies Inc.
Scientific Technologies Inc. ("STI") is a North American leading
provider of automation safeguarding products and services through its
Safety Product Group ("SPG"). STI's Optical Sensor Division ("OSD"),
part of the SPG, provides safety products that are used to protect
workers around machinery, automated equipment and industrial robots.
STI's products serve a wide variety of applications and markets,
including semiconductor, automotive, electronics manufacturing,
packaging and consumer markets. OSD also manufactures sensors used in
factory automation and vehicle separating systems. STI's Machine
Services Division ("MSD"), also part of the SPG, provides safety
services such as safeguarding equipment installations, machine safety
assessments, and the design and custom fabrication of guarding
solutions. MSD specializes in machinery services including the repair,
relocation, installation and service of fabrication machinery. MSD
serves customers in a variety of industries, including metal
fabrication, aerospace, electronics, building materials, automotive
and food processing. Further information on SPG is located at
www.sti.com and www.stiscanners.com.
STI's Automation Products Group ("APG") serves the factory
automation, semiconductor, transportation, oil and gas, consumer and
food processing industries with a diversified offering of sensing
technologies. Products include level, flow, pressure sensing,
positioning transducers, and ultrasonic sensors and controls. Further
information is available at APG's web site located at
www.automationsensors.com.
STI is controlled by a parent company, Scientific Technology Inc.,
that owns approximately 86% of its common stock. Scientific Technology
Inc. is controlled by members of the Lazzara family.
Additional Information and Where to Find It
STI intends to file a proxy statement in connection with the
proposed transactions, a copy of which will be mailed to the
shareholders of STI. STI'S shareholders are urged to read the proxy
statement and other relevant materials when they become available
because they will contain important information about the proposed
transactions. Investors and security holders may obtain free copies of
these documents (when they are available) and other documents filed
with the Securities and Exchange Commission (the "SEC") at the SEC's
web site at www.sec.gov. In addition, investors and security holders
may obtain free copies of the documents filed with the SEC by STI by
going to STI's Investor Relations page on its corporate website at
www.sti.com/financial/index.htm, by contacting STI in writing at 6550
Dumbarton Circle, Fremont, California 94555 or by calling STI at (510)
608-3400. In addition to the proxy statement, STI files annual,
quarterly and current reports, proxy statements and other information
with the SEC. A copy any such reports, statements or other information
filed by the Company are available at the SEC public reference rooms.
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The Company's SEC filings are also available
to the public from commercial document-retrieval services and at the
website maintained by the SEC at http://www.sec.gov.
In addition, STI and its officers and directors may be deemed to
be participants in the solicitation of proxies from STI's shareholders
with respect to the proposed transactions. A description of any
interests that STI's officers and directors have in the acquisition
will be available in the proxy statement. Information concerning STI's
directors and executive officers is set forth in STI's definitive
proxy statement for its 2005 Annual Meeting of Shareholders filed with
the SEC on April 25, 2005. Updated information about STI's directors
and executive officers will be included in the proxy statement that
STI intends to file in connection with this transaction.
Cautionary Statement About Forward-Looking Statements
Statements in this news release that are not historical facts are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements include, but are not limited to, statements regarding the
value of the transactions, conditions to closing, the consideration of
superior offers, if any, relating to the sale of the APG business,
expected timing of the closing, expected benefits of the merger,
structure post-closing, combined market and product offerings, and
anticipated shareholder premiums. Readers are cautioned that these
forward looking statements involve certain risks and uncertainties.
These risks and uncertainties, which could cause STI's results to
differ materially from the forward looking statements include:
economic and political conditions in domestic and international
markets; declining market demand for industrial safety and security
products generally; introduction or increased demand for alternative
products; potential errors, defects, design flaws or other problems
with STI's products; changes in regulations regarding industrial
safety and security products; and other risks detailed from time to
time in STI's Security and Exchange Commission filings and reports,
including STI's annual report filed on Form 10-K and quarterly reports
filed on Form 10-Q. STI disclaims any obligation to update any
information contained in any forward looking statement.