Allied awarded $88 million anti-armor ammunition contract

March 29, 1991|By Ted Shelsby

The stock of Allied Research Corp. skyrocketed yesterday as the company announced that it has been awarded an $88 million contract -- one of the largest in its history -- to produce anti-armor ammunition for an unidentified "friendly" foreign country.

Allied's stock actually began its sharp rise Wednesday, when shares traded on the over-the-counter market jumped 32 1/2 percent, from $5 to $6.625. With 446,000 shares trading hands, it was the second-most actively traded issue on the OTC.

The shares jumped another $1.125 yesterday, to $7.75, bringing its gain for the past two days to 55 percent. Allied's shares traded as high as $8 yesterday.

The Baltimore-based Allied shares have been trading at about $5 a share since the first of the year. Volume has ranged between 5,000 and 10,000 shares a day.

The activity in the stock attracted the attention of the National Association of Securities Dealers, the industry's self-policing agency, which contacted Allied Wednesday to ask the company if there was a reason for the active trading.

Richard Farrell, head of investor relations for Allied, said that in response to the NASD inquiry the company disclosed that a large contract was imminent. He said that it was highly unlikely that anybody knew about the contract because it was "top secret."

Allied agreed to announce the award before the market opened yesterday morning. NASD did not halt trading in Allied shares.

John Henie, a spokesman for the Securities and Exchange Commission in Washington, said he could not confirm or deny that the agency was investigating Allied's trading, but he added: "We do have our eyes open."

Michael Meek, an analyst with Ferris, Baker Watts Inc. in Washington, said that it is not unusual for word to leak out when a company is negotiating with a government agency on a contract. In the case of Allied's stock, he said: "Someone knew something or thought they knew something."

The award was a "very large contract for Allied," said Mr. Meek, adding that it increased the firm's backlog of business by more than 50 percent in one step.

In announcing the contract, Reinald W. Carter, president and chief executive officer, noted that the award increased the backlog of business orders to $240 million.

Allied has struggled in recent years and has not posted a profit since 1987, when it ended the year $1.3 million in the black. Last year it posted a loss of $7.5 million on sales of $44.8 million. For the first three quarters of 1990, Allied reported a deficit of $4.9 million on sales of $28 million.

Allied is scheduled to report year-end results Monday.

The new contract was awarded to an Allied wholly owned subsidiary, Allied Research Corp. Ltd. of London.

Allied said that under terms of the agreement it could not identify the customer. Mr. Farrell stressed, however, that it was not Iraq.

The work will be performed by another Allied subsidiary in Belgium. Mr. Farrell said that "we wouldn't ship anything without the approval the U.K. [United Kingdom] and Belgium governments."

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