AAI parent to heighten its search for a buyer

Major shareholder trying to force sale of company

August 27, 2002|By Robert Little | Robert Little,SUN STAFF

The parent corporation of Hunt Valley defense contractor AAI Corp., which is facing a proxy battle from a major shareholder intent on forcing sale of the company, announced yesterday that it would "intensify and accelerate" its search for a buyer.

United Industrial Corp. has said since April that it wants to sell all or some of its subsidiaries, including AAI, an aircraft and technology manufacturer that accounts for more than 85 percent of its revenue.

Late last month, the company sold the last of its transportation overhaul contracts, an underperforming division that was considered a repellent for potential buyers of the remaining business.

Company officials issued a statement yesterday saying that they are pursuing a sale with renewed vigor, because shedding the transportation business "has put the company in a stronger position to engage in such discussions."

"United Industrial's board is committed to maximizing value for our shareholders, and we believe that a sale of all or part of the company is the best avenue for achieving that objective," Chief Executive Officer Richard R. Erkeneff said in the statement.

But the announcement came just days after Warren G. Lichtenstein, head of an investment group that owns more than 10 percent of United Industrial, accused Erkeneff and others of not working diligently enough to find a buyer.

Lichtenstein, a member of the board, has nominated a slate of additional board members for election at the company's annual meeting in October in the hope of seizing control of the company and beginning "a more thorough investigation of strategic alternatives."

Shares of United Industrial Corp. shot up 7 percent yesterday, rising $1.34 to close at $20.34 on the New York Stock Exchange.

"We do not believe that the current Board of Directors is acting in your best interests," Lichtenstein wrote in a letter to shareholders last week. "Maximum stockholder value will only be achieved through a prompt sale of all or substantially all of [United Industrial]."

Neither Lichtenstein nor company executives returned calls yesterday seeking comment.

AAI, which manufactures pilotless surveillance aircraft and training systems for military hardware, has long been regarded as an attractive takeover candidate.

Manufacturer of the Pioneer and Shadow unmanned aerial vehicles, it is one of the few established companies in an emerging niche of the defense industry.

United Industrial's statement said the company has held "substantive discussions" with potential buyers.

Even Lichtenstein's proxy fight suggests a sale or merger might happen soon.

He said in filings with the Securities and Exchange Commission that his primary motivation is to force a postponement of the company's annual meeting Oct. 4, believing that "a sale or other similar transaction ... could be agreed to prior to the annual meeting."

"We are ... preparing to commence a proxy fight only as a last resort," he wrote.

Lichtenstein and his investment group, Steel Partners II, have a long history of proxy fights, hostile takeovers and other "activist" investment activities.

He frequently serves on the boards of companies in which his group invests, almost always so he can negotiate some type of sale or merger.

AAI employs about 900 people in Maryland and has a 50-year history in the state. It is considered the core operation of its parent company - so much so that United Industrial's New York headquarters is typically regarded as little more than a branch office of AAI.

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