Hi Steven...Possible Takeover!!!
Here is an interesting article about the prospects of INEL:
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2/07/97 - Intelligent Electronics to Spin Off Troubled Subsidiary
Feb. 7 (The Philadelphia Inquirer/KRTBN)--Intelligent Electronics Inc. said Thursday that it will spin off its troubled subsidiary, XLConnect Solutions Inc., and give it to its shareholders.
The spin-off, which is subject to regulatory approval, is worth about $96 million to the shareholders, based on the current price of XLConnect shares.
It means that Intelligent Electronics" shareholders will receive shares of XLConnect based on the number of Intelligent Electronics shares they hold. XLConnect will then be independent.
The distribution is scheduled for the end of the summer and will go forward only if the Internal Revenue Service determines it is a tax-free event for shareholders.
Intelligent Electronics owns 13.325 million shares of XLConnect"s common stock, which closed Thursday at $7.38 a share.
The spinoff could be a prelude to Intelligent Electronics itself being acquired, possibly by a competitor, said Kathleen Smith, an analyst who follows the company for Renaissance Capital Corp. in Greenwich, Conn.
XLConnect shares lost more than half of their value on Jan. 24 after the computer-network consulting company announced that fourth-quarter earnings would be substantially below analysts" estimates. The announcement also caused Intelligent"s stock to fall.
That same day, Intelligent Electronics announced that it had engaged financial advisers to help the board of directors explore "strategic alternatives for the company."
"It is a lot of mumbo jumbo meaning they are possibly for sale," said Smith, adding that the spin-off clears the deck for a sale of Intelligent Electronics and clarifies matters concerning XLConnect"s future.
In its Jan. 24 announcement, Intelligent Electronics said the alternatives under consideration included the possible sale of all or a portion of XLConnect"s stock or the distribution of the stock to shareholders, which was actually decided upon.
Unclear is whether Intelligent Electronics is still considering the other alternatives it announced, including the sale of a division and "various mergers or acquisitions."
Under ideal conditions, Intelligent Electronics clearly would have preferred to sell its shares in XLConnect rather than spin them off, Smith said.
When XLConnect went public last year, Intelligent Electronics retained the proceeds of the sale. The stock went public at $15 a share and climbed as high as $31.75 a share.
It was unlikely Intelligent Electronics could have sold its remaining 80 percent stake in XLConnect because of financial and management problems at the subsidiary, as well as Intelligent Electronics" own business difficulties, Smith said.
Intelligent Electronics, a wholesale distributor of computers, has had difficulties lately in a business characterized by low profit margins and fierce competition.
On Jan. 24, XLConnect also announced that chief executive Richard Ellenberger had asked to negotiate his departure.
On Tuesday, the company said Ellenberger was gone and quoted him as saying, "The parting is amicable. The issue was one of autonomy, not company performance."
XLConnect also announced Tuesday that Timothy Wallace, the company"s
president and chief operating officer, had been elected to its board of directors.
"The fundamentals of XLConnect"s business are strong," Wallace said in the prepared statement. "I have every confidence in the company"s strategic direction and its potential."
Investors seemed to like the spin-off decision. Intelligent Electronics shares rose 31 cents to $4.44. XLConnect"s rose 13 cents to $7.38. XLConnect"s shares may also have been helped by an analyst"s upgrade. Edward S. Caso Jr. of Alex. Brown & Sons Inc. raised the stock to "buy" from "neutral."
So far this year, Intelligent Electronics" stock has lost 45 percent of its value, while XLConnect"s has lost 74 percent.
By Dan Stets
Visit Philadelphia Online, the World Wide Web site of The Philadelphia
Inquirer, at phillynews.com
(c) 1997, The Philadelphia Inquirer. Distributed by Knight-Ridder/Tribune
Business News. INEL, END!A3?PH-INTELLIGENT
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Regards
Salah |
