Takeover fight to start for Canada

A Canadian maker of industrial networking equipment is being chased by competitor which says it will soon make an unsolicited bid for the company.
It could turn out to be a fight between a billion-dollar U.S. company and a much smaller Ontario firm.
RuggedCom Inc. of Concord, Ont., which makes wired and wireless switches and routers found in electrical power stations was cool to Monday’s announcement that Belden Inc. will make an all-cash offer to buy all of the stock of the Canadian company for $280 million.
“RuggedCom cautions its shareholders that Belden has not made a formal offer and no action is required by RuggedCom shareholders at this time,” the company said in a statement. “RuggedCom recommends that shareholders take no action until shareholders have received further communications from RuggedCom’s board of directors.”
The statement also said it has formed a special committee to consider any offer and hired outside legal and financial firms for advice. But it also added it is the committee’s preliminary view Belden’s timing and approach is “highly opportunistic and that Belden’s offer clearly undervalues RuggedCom.”
Belden said in a statement that its offer to RuggedCom [TSX: RCM] shareholders will filed “in the days to come.” It will hold a conference call Tuesday.
Based in St. Louis, Belden makes networking, cable and connectivity products for enterprises, industrial automation, education, healthcare, transportation and other industries.
Its brands include Hirschmann hardened Ethernet switches, Belden fibre optic connectors and communications cables, Belden networking racks and enclosures and Lumberg Automation connectors for the automotive industry.
It has operations in Coburg, Ont., Vancouver and Montreal.
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 March 31, RuggedCom [TSX: RCM] had net income of $6.18 million on revenue of $93 million.
(An earlier version of this story incorrectly gave quarterly figures as annual numbers).
The battle will mark another in a series of fights for publicly-traded Canadian IT companies. Earlier this year Sterling Partners of Chicago beat Ottawa’s WiLAN Inc. in a struggle over Ottawa’s Mosaid Technologies Inc. In that case Mosaid welcomed the Sterling bid.
Belden said its bid for RuggedCom will be $22 a share. In a note to investors, National Bank Financial analyst Kris Thompson suspects RuggedCom will be able to get Belden or a white knight to push the bidding up to $28 a share. “RuggedCom deserves a premium given its market leadership,” he wrote.

A new owner could cut at least $11 million from RuggedCom’s annual operations expenditures, Thompson argued, or about 20 per cent of its budget. RuggedCom has what appears to be strong revenue growth, he also noted.

General Electric or Cisco Systems Inc., which both have rugged networking equipment lines, could be bidders.

RuggedCom shares had been trading in the $22 range in the summer but since dropped off to $13 last week. But this morning it leapt back to $22.

In a statement explaining its bid, Belden CEP John Stroup said “the combined company would be a technology leader in Belden’s target market segments and would deliver considerable value for Belden customers and shareholders, as well as provide growth opportunities to RuggedCom employees.”

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including ITBusiness.ca and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@] soloreporter.com

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