International Specialty Watching Dexter's Laboratory Dave Marino-Nachison (TMF Braden)
December 16, 1999
"For investment purposes only." It might read like the title of an upcoming James Bond movie starring Roger Moore as a dashing hedge fund manager, but to practiced readers of SEC filings -- not the sort of group that generally gets the Bond girls, I'm afraid -- it's better known as the boilerplate language investors or groups taking a 5% stake or better in a company use when they aren't trying to ruffle management's feathers.
And that's just the phrase consumer and industrial chemicals company International Specialty Products (NYSE: ISP) included when it reported a 5.07% stake in specialty materials supplier Dexter Corp. (NYSE: DEX) in April. The next sentence was more telling: "Although the possibility of a business combination with [Dexter] has been raised and may be considered in the future," the filing read, International Specialty Products (ISP) has "made no determination to seek control of the corporation."
That determination has since been made; on Tuesday, ISP announced an unsolicited $45 per share offer for Dexter. The offer represented a nearly 40% premium to the previous day's closing price. Dexter Chairman and CEO Grahame Walker dutifully referred the offer to his board, though he took a dig at the offer price and ISP's means of funding its offer -- which ISP responded to in an oh-so-polite letter and filing this morning.
The daily tennis match between ISP and Dexter will likely grow tiresome, but the background between the two companies makes for good reading. ISP Chairman Samuel Heyman wasn't happy when Dexter picked up 71% of Life Technologies, a biotechnology products company he coveted that trades over-the-counter.
ISP, also a Life Technologies shareholder, believes Life Technologies' value gets lost in the Dexter mix and wants it freed up. In a recent letter to Walker, Hyman -- who insists he's tried to make his point in meetings to no avail -- said, "We believe that Life Technologies, with its higher growth and higher margins, can better fulfill its potential as an independent entity, or in combination with another similarly strategically situated company, rather than in combination with Dexter."
Since April ISP has amassed a nearly 10% stake in Dexter in a move to get its plans across Walker's desk, prompting Dexter to lower the "poison pill" provision of its shareholder rights takeover defense plan to 11% from 20% in October. That should be a telling move, and investors might wonder how it has set the tone for discussions between the companies.
Also making the wires today via Bloomberg is the news that a Dexter shareholder has apparently sued the company for turning down ISP's offer -- though no public statement has been made to that effect -- in a play by Dexter's management to keep their jobs at the expense of minority stockholders. Dexter officials couldn't be reached by deadline for comment.
So what should investors take from this? For one thing, this week's news serves as a valuable reminder to watch your investments carefully, particularly in the case of SEC filings, which often hide crucial and even market-moving nuggets. In this case, an investor might have been alerted to the potential encroachment of a vocal minority shareholder with a follow-up phone call or two.
In the specific matter of Dexter vs. ISP, investors might want to take a closer look at Heyman's allegations about Life Technologies' prospects. If discussions break down further and ISP decides to go ahead with a hostile tender offer, shareholders may be forced to choose.
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International Specialty Products
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