COMPANY NEWS - Tandem Computers To Buy Ungermann - NYTimes.com
Sep 15, 2013
COMPANY NEWS; Tandem Computers To Buy Ungermann
By LAWRENCE M. FISHER, Special to the New York Times
Published: February 17, 1988
SAN FRANCISCO, Feb. 16— Tandem Computers Inc. said today that it had agreed to acquire Ungermann-Bass Inc., a leading maker of local area networks, for approximately $260 million. After the merger, Ungermann-Bass will operate as an independent division of Tandem, which is based in Cupertino, Calif. Ralph K. Ungermann, the chairman, president and chief executive of Ungermann-Bass, will become a Tandem vice president and be nominated to Tandem's board. Under the terms of the acquisition, which has been approved by both companies' boards, Tandem will acquire all of Ungermann-Bass's 18.5 million shares outstanding at $12.50 a share in cash and all of the company's 6 7/8 percent convertible subordinated debentures outstanding at a cash price of $833.34 per $1,000 in face value. In November, Ungermann-Bass rejected an offer of $9.75 a share in stock from Digital Communications Associates Inc. of Alpharetta, Ga. Ungermann-Bass's shares closed at $12.125 today, up $3.625, in over-the-counter trading. Analysts said that the deal fitted Tandem's long-term product strategy but that it would slightly dilute this year's earnings. Ungermann-Bass manufactures networks to link large computer systems. Tandem shares closed today at $18.25, down 37.5 cents, on the New York Stock Exchange. Mr. Ungermann said in a statement that he expected his company's growth to be enhanced by Tandem's worldwide presence and strong service organization. ''We have long recognized that Tandem's fundamental contribution to reliability and expandability is key to the success of large networks,'' he said. Among Ungermann-Bass's projects is a network to connect 40,000 computers and robots in three of the General Motors Corporation's manufacturing plants. The acquisition ''does have strategic merit from Tandem's perspective,'' said Jeffry Canin, an analyst with Hambrecht & Quist Inc. in San Francisco. ''There is a slight negative: It looks like they paid a pretty steep price and it will be dilutive in the short term. ''
But John Jones, an analyst with Montgomery Securities Inc., said that the dilution would be minimal and that the price was not unreasonable. ''While Ungermann has not shown the greatest performance lately, their market focus is very similar to Tandem's focus,'' he said.