In a not unexpected move, the directors of a Canadian maker of networking equipment for harsh environments has rejected a CDN$280 million unsolicited offer from a U.S. competitor.
In a statement Wednesday morning, the board of RuggedCom Inc. of Concord, Ont., said the offer from Belden Inc."fails to adequately compensate shareholders for RuggedCom's strong prospects for continued growth, profitability and shareholder value creation."
Meanwhile, chairman Peter Crombie said in the statement, RuggedCom is now "aggressively exploring and evaluating alternatives to the Belden Offer. We are encouraged by the response we have received from interested parties thus far and will provide a further update in due course."
The board is hoping Belden will either raise its CDN$22 a share bid, or other companies will step forward with a higher offer. Before trading opened today the market had pushed shares up to CDN$24.75. After the market opened the shares were up 10 cents.In briefly detailing its objections, the board said its financial advisor -- TD Securities -- concluded the Belden offer isn't high enough. The board also believes the timing of the offer is "highly opportunistic and disadvantageous to RuggedCom shareholders.""Market sentiment" -- a reference to the current share price -- "supports the financial inadequacy of the Belden offer," the board statement added.
Based in St. Louis, Belden is substantially larger than RuggedCom. It makes networking, cable and connectivity products for enterprises, industrial automation, education, healthcare, transportation and other industries. In 2010, Belden [NYSE: BDC] had net income of US$108 million on revenue of US$1.6 billion. By contrast for its fiscal year that ended Sept. 30, RuggedCom [TSX: RCM] had net income of $1.8 million on revenue of $28.6 million.
Belden has been making approaches to RuggedCom for the past 18 months, the company says, in a bid for a friendly takeover.