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The eBearing News
September 28, 2004
General Bearing Management
Abandons Latest Buyout Bid
copyright © 2004 eBearing Inc.
The second management buyout attempt for General Bearing Corp. (USA) has been abandoned,
the group announced.
GBC Acquisition Corp. -- a top management entity controlling 66% of General Bearing's
outstanding shares -- was making its second attempt in four years to take the
publicly-traded (NASDAQ: GNRL) company private.
GBC Acquisition consists of founder and Chairman, Seymour Gussack, CEO David Gussack, Director
Robert Baruc, and Director Nina Gussack.
After giving up on a similar buyout in 2000-2001, the group revived its plan earlier this year.
But while the 2000 buyout was related to the company's undervaluation during the dotcom boom, this
latest effort, they said, was being pursued because the costs of complying with new Securities and
Exchange Commission regulations are now out of proportion for General Bearing's size and liquidity.
With the stock trading around an average of $3.10 per share in 2004 -- it had been as high as $4.17 in
mid-2003 -- GBC Acquisition offered $3.50 per share.
• 2004 article: General Bearing management revives buyout plan
(includes a review of the 2000-2001 buyout)
The offer triggered an unexpected firestorm of criticism from private and institutional shareholders
claiming it was an effort to lowball a bid, taking advantage of management's insider position and the little
attention it received on Wall Street. Meanwhile, the share price climbed over $3.50.
In the face of this mounting criticism and seeing few shares tendered, GBC Acquisition upped its offer in mid-July
to $4.00 per share, simultaneously warning it would not go over $4.00 under any circumstances.
• 2004 article: General Bearing management ups buyout offer to $4.00
As the new offer was announced, however, the share price immediately jumped over $4.00. Normally, when a
buyout offer is made, the share price will jump and settle just below the offer price.
In late July, shareholder Don Whitaker complained to the SEC that the offer was, "totally inadequate,"
and, "a disgrace to corporate democracy." Mr. Whittaker noted the $4.00 offer price is below the $7.00
company's 1997 IPO at $7.00 per share. His investment company, Don C. Whitaker Inc., takes equity
stakes in companies they believe are significantly undervalued. It has acquired a substantial interest
(over 5% of the outstanding shares) in General Bearing, most of it recently.
While shareholders raged at the lowball offer, in most cases their anger was a reflection of strong belief
in the company's management, and that General Bearing has an exceptionally bright future.
Several shareholders contacted eBearing specifically to clarify this apparent contradiction. They said
that while they object to the lowball offer from the management group, they nevertheless support
management and how the business is being run. Further, they all shared strong beliefs that General Bearing
is on a good track into the future and its shares are significantly undervalued by Wall Street.
In mid-July, a major shareholder challenged the buyout, filing a SEC schedule 13D, indicating his interest
in exercising appraisal rights under the Delaware General Corporation law.
GBC issued a press release in response, countering that no appraisal rights are triggered under Delaware law
unless the contemplated merger of GBC acquisition is completed, following the tender offer. The group
reiterated it, "will not, under any circumstances, increase the offer price above $4.00 per share."
On August 11, General Bearing, GBC Acquisition and General Bearing's Board of Directors were named in
a proposed class action lawsuit, aimed at stopping the sale by court injunction.
The offer period expired at midnight, August 13, 2004, without the management team acquiring the 90%
ownership it stipulated to continue with the buyout plan. In a statement, GBC Acquisition said, "Accordingly,
the tender offer expired in accordance with its terms, and GBC Acquisition Corp. will not accept for payment,
and will not pay for, any tendered shares."
General Bearing since reported sales of $21.5 million for the quarter ended July 3, 2004, up from $18.3
million for the previous quarter and $14.6 million for the quarter ended January 3.
Profits for the July 3 quarter his $691,000, up from $687,000 the previous quarter and a loss of ($674,000)
in the quarter ended January 3.
The company's share price has recently settled at around $4.50.
After the furor had died down, eBearing asked General Bearing CEO David Gussack to comment on the buyout.
Mr. Gussack told eBearing, "It is evident to us that the tender offer price was of sufficient interest to the
shareholders of record at the time it was announced. The volume over the 90 day period indicated that
the real shareholders 'took' the offer, but sold on the open market at the newly adjusted price level that
was established by our offer."
Evidently," he said, "they sold to opportunists who hoped to wring a better offer out
of us, despite our public disclosure regarding that possibility wherein we said that that absolutely
would not happen. We have no plans to try again."
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
trademarks of eBearing Inc.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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