Peak Group To Be Sold For $210 Million

Canada Printer To Buy Columbia Specialist In Bar-code Scanning

Deal Equals $18 A Share

Sale Is Linked To Loss, `Digestion Problems' In Acquiring 16 Firms

April 24, 1997|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

Peak Technologies Group Inc. ended the ride of a stock price that had been careening like a runaway grocery cart, as the Columbia-based bar-code scanner company announced it will sell itself to a Canadian printing company for $210 million.

The deal, valued at $18 a share, is well below Peak's 1995 high of about $33 a share but well above the low of $8.50 the shares hit in March, after too-fast growth led to a couple of poor quarterly earnings reports and a restructuring.

It also ends the independence of a 9-year-old company that went public in 1992 at the same $8.50 a share and employed 813 people, according to Securities and Exchange Commission filings.

Peak will become a unit of Moore Corp. Ltd. of Toronto, which said it bought Peak as part of a strategy to get more involved in technology businesses that have better growth prospects and profit margins than its business equipment, direct-mail and printing businesses.

"It was time to sell. A year ago it was [near] $30," said Neal Kaplan, an analyst with Scott & Stringfellow. "It's tough for management to turn down an offer that's twice where the stock was when the offer was made."

Peak grew 35 percent a year for the three years that ended in 1995, said Steven M. Ashely, an analyst who follows the company for Robert W. Baird & Co. Inc. in Milwaukee. Sales went to $215 million last year from $77 million in 1972, driven by 16 acquisitions of other bar-code scanner systems integrators and distributors.

The hangover from that party was that the company was not terribly profitable even in a top year such as 1995, when operating profits were still less than 8 percent of sales and net income was less than 4 percent.

The narrow margins left Peak vulnerable to short-term fluctuations like the one that hit in September, when a single order cancellation and a handful of shipping delays meant the company would only break even in the third quarter instead of earning $3 million that analysts expected. The news knocked 45 percent off Peak's stock price in a day.

"What happened was we increasingly became quarterly-driven," said Nicholas R. H. Toms, Peak's chief executive.

"We had a lot of incentives that encouraged our sales guys to go for big, high-margin deals. Our quarters became increasingly back-end loaded and dependent on big-hit deals at the end of the quarter. If anything moved [to the next month], it led to a missed quarter. The market obviously punished our stock as a result of those things."

The company was also having what Toms called "digestion problems" in absorbing the newly purchased companies.

In the fourth quarter, Peak took a $7 million restructuring charge, including severance for about 5 percent of Peak's employees, that contributed to a $16.8 million loss for the quarter and a $12.6 million loss for all of 1996.

When the company announced the loss March 31, it also said it had received an unsolicited takeover offer.

Toms said Peak had actually been looking to buy more companies, and had hired two new senior operating executives early this year as part of a plan to push annual sales to $500 million. The company also had been advertising heavily for workers in Columbia.

"In the long run, Peak would have been fine," said Ashely, who thinks the company would have earned about $7.5 million to $8.5 million next year, or up to 90 cents a share. "But could its fundamental earnings power have taken Peak to $18 within a few months? To see an offer of 20 times next year's number was fair."

Peak's stock rose $4.50 to $17.50 yesterday on volume of 7.4 million shares, pushing the company's total value to more than 50 times the profits analysts expected the firm to earn this year. Peak has 9.3 million shares outstanding.

Pub Date: 4/24/97

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.