Shareholders of Essex Corp. approved yesterday the sale of the company to Northrop Grumman Corp. for $580 million - an unimaginable event eight years ago when the company verged on bankruptcy and the share price was quoted in cents rather than dollars.
Wearing a blue dress shirt and a parrot dangling from a green Mardi Gras-style beaded necklace, Leonard E. Moodispaw, the company's unconventional chairman, chief executive officer and president, read aloud the formalities of the proxy vote to the 30 shareholders who attended the special meeting at the company's headquarters in Columbia. He confirmed that a majority of the shareholders - most of whom are institutions - had approved the cash-and-debt offer from Northrop Grumman.
Despite the magnitude of the sale, the meeting lasted just seven minutes and ended with applause.
Afterward, Moodispaw, who is usually quick to quote a line from his favorite singer Jimmy Buffett to sum up his mood, was quiet, almost somber. He called the vote "anticlimactic."
"I'm ready to get on with getting operations moving," he said.
With more than half of its 1,000 employees carrying highly sought-after security clearances, Essex is considered an attractive acquisition for Northrop Grumman, the nation's third-largest defense contractor and Maryland's largest for-profit employer.
Founded in 1969 by a group of scientists from the National Security Agency, Essex has an optoelectronic processing technology that allows government intelligence agencies to analyze images and signals at a rapid pace. It holds a number of classified contracts, including with NSA, and expects revenue of between $250 million and $260 million for 2006.
Northrop Grumman offered shareholders $24 for each of their shares, which meant a handsome profit for many who had taken a chance on a company with a lot of promise but no profit.
Shareholder Perry Carvellas of Alexandria, Va., bought Essex stock 10 years ago when it was worth around $3 a share. He said he steeled himself through the company's "trials and tribulations" when the stock's value dropped below a quarter a share.
After the votes were announced, Carvellas was all smiles as he sought out Moodispaw to shake his hand. "If he's for it, I'm for it," Carvellas said of Moodispaw. "He's been an excellent chief executive."
Still, others thought Essex was worth more, and rumors circulated on Internet message boards and among shareholders over the past month that there was a better offer coming. Moodispaw insisted that there were no competing bids and that Northrop Grumman's offer was "in the best interest of the shareholders."
An attorney for Northrop Grumman who was present after the shareholder meeting declined to comment on the offer or vote.
The deal is expected to close during the first quarter, pending approval by antitrust authorities.
Northrop Grumman refiled its request for government approval Jan. 3, saying authorities likely did not have enough time to consider the deal during the holiday month of December and could have delayed the closing of the deal indefinitely as a result. By refiling, the government has another 30 days to make a ruling and keep the deal on track, Northrop Grumman officials said last week.
Essex would become a business unit of Northrop Grumman's Reston, Va.-based Mission Systems sector, which employs 17,000 in 47 states and 19 countries and has eight divisions.
Moodispaw and Terry M. Turpin, the company's chief scientist, signed agreements with Northrop Grumman that prohibit them from working for a competing firm for two years after the deal is completed. Moodispaw would receive an annual salary of $350,000 and an annual performance bonus worth up to 40 percent of his salary, along with $500,000 and restricted stock if he stays on for two years. Turpin is eligible for a bonus worth up to half his base salary if he stays.
When the merger was announced in November, analysts said that retaining Moodispaw would be key to a smooth transition. They credit him with maintaining the company's quirky culture, a big reason behind its success. As the company's annual report states: Moodispaw is "still growing older but not up, enjoys rock `n' roll, chocolate and Key West, Florida. He takes pride in accomplishing things."
A former senior manager at NSA, Moodispaw came aboard as a top executive in 1998 when Essex was on the brink of liquidation. At the time, the company was being kept alive financially by longtime CEO Harry Letaw as well as Turpin, who invented many of its products.
Alan A. Ehrlich, a senior consultant at Houlihan Valuation Advisors in Rockville who served as an adviser to Essex and later bought stock in the company, said the offer from Northrop Grumman was a fair one because many companies with classified contracts are undervalued by Wall Street.
"They have invented an unbelievable piece of equipment that could potentially be very valuable, but they've been trying to sell it for years," Ehrlich said. "It takes someone with deep pockets like Northrop to develop it."
Essex stock closed up 6 cents yesterday at $23.76 a share.