Deal May Be Worth $40 Million : CCT Agrees to Acquire Santa Barbara Firm
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Computer & Communications Technology Corp. has agreed in principle to acquire closely held Acton Computer Technology Inc. of Santa Barbara in a stock swap that at current prices may be worth $40 million, the company announced Monday.
Acton makes recording heads for computer disk drives, a kind of memory storage device, and had revenues of $23.3 million for the year ending March 31. Acton, which employs more than 1,500, booked sales of $16 million for the six calendar months ended June 30, CCT Chairman Everett Bahre said Monday. Acton operates manufacturing plants in South Korea and Thailand.
CCT, also a recording head manufacturer, posted revenues of $67 million for fiscal 1986 and now has nearly 3,500 employees, Bahre said. The company operates manufacturing plants in Tijuana, Puerto Rico and the Dominican Republic while maintaining its headquarters in San Diego.
CCT will issue 3.5 million new shares in exchange for all outstanding Acton shares. CCT stock traded unchanged at $11.50 bid in over-the-counter trading Monday.
Backed Out of Deal
CCT and Acton reached a similar agreement last year but Acton backed out of the deal in June, 1986, after CCT disclosed that a former subsidiary, Zeta Laboratories of Sunnyvale, had overcharged the government for work on microwave contracts. The disclosure caused the CCT stock price to plummet, making a stock swap less attractive to Acton.
The disclosure also caused Whittaker Corp. to rescind its purchase of Zeta, a deal that had been consummated in February, 1986. The rescission, paired with CCT’s write-down of assets connected to the discontinuance of its thin film recording head business, helped produce a loss of $27.4 million for CCT last year.
Although CCT made a $4.5 million provision last year for possible reimbursements to the government for the Zeta overcharges, Bahre said the government still has not settled the case. Also unresolved is a class-action shareholder suit filed last year that alleged CCT management withheld damaging information before and during Zeta’s initial public stock offering in 1985.
Bahre said he hopes a “significant portion of key employees” now at Acton’s Santa Barbara headquarters site will join CCT in San Diego but would not say whether some Acton workers will be laid off. Acton’s administrative functions will be consolidated with CCT’s in San Diego.
Different Areas Served
Bahre described the merger as a good marriage of companies serving different segments of the computer disk drive market. CCT’s recording heads are sold mainly to high-end producers of 5.25-inch and 3.5-inch rigid disk drive manufacturers, while Acton serves a somewhat lower-end segment of both markets, Bahre said.
One of the most appealing things about Acton, Bahre said, is the abundance of manufacturing capacity the company has at its Korean and Thailand facilities. CCT can use the capacity to meet what has been a huge surge in demand for its products, evidenced by the growth in CCT backlog to $57 million as of June 30, up from $27 million on Dec. 31.
At the CCT annual meeting in May, Bahre predicted revenues would increase to between $90 million and $100 million in fiscal 1987, thanks in large part to demand created by the resurgence of the personal computer market. Those projected sales figures did not include the added sales from Acton.
