Shares in Silent Witness Enterprises Ltd. soared more than 50 per cent yesterday after the video-monitoring technology company agreed to be bought for $87-million by U.S.-based conglomerate Honeywell International Inc.
The price for Silent Witness, based in Surrey, B.C., is $11.27 a share, 55 per cent above Friday's close of $7.25.
The takeover was announced late Friday, and Silent Witness shares opened yesterday above the offer price at $11.45, before easing back to $11.15, up $3.90 or 54 per cent on the Toronto stock market.
The agreement with Honeywell, which is Silent Witness's largest customer, is non-exclusive, meaning other bidders could emerge.
While the Silent Witness board has recommended that shareholders accept the takeover, "if somebody else comes in and makes it better, that's good," said Rob Bakshi, chairman and chief executive officer, who founded the company in 1986.
"Letting your baby go is not the easiest thing in life," Mr. Bakshi said in an interview from Surrey.
He added that he does not expect Honeywell to make any cuts to the 160 workers at Silent Witness, all but 20 located in British Columbia.
Mr. Bakshi said he and the board would not have any reason to sell without a significant offer because the company is debt-free and consistently profitable.
Silent Witness earned $2.3-million in its 2003 financial year ended July 31, more than double its 2002 profit. Annual revenue surpassed $56-million.
"We were never a financially constrained company," Mr. Bakshi said, adding that Silent Witness holds 6 to 7 per cent of the market for industrial and institutional closed-circuit television systems internationally.
"Financially, we were always very strong -- we always knew how to make money. What [the sale]does is take our technology's exposure to the next level in the marketplace."
Silent Witness designs and manufactures closed-circuit television cameras, digital and analog storage products, and remote video surveillance systems. Its technology is used by prisons, casinos, schools, transit systems, taxis, retailers and banks.
Linking with Honeywell, a technology and industrial conglomerate with $22-billion (U.S .) in annual revenue, gives Silent Witness a boost in market presence, Mr. Bakshi said.
Kevin Lo, a Calgary-based analyst who follows the company for Lightyear Capital Inc., said the heavy premium Honeywell is prepared to pay for Silent Witness likely is a pre-emptive strike against potential rival bids from companies such as General Electric Co., Tyco International Ltd. and L-3 Communications Holdings Inc.
"There's big conglomerates trying to get into the industry," Mr. Lo said, adding that $87-million (Canadian) from Honeywell is "not a lot of money to them, to be able to acquire an established player with a good balance sheet and a well-run organization."
It also is "terrific" for Silent Witness shareholders, Mr. Lo said.
"Any time you get a 55-per-cent premium on your shares, I don't think anyone is going to block the deal."
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