Micronetics execs will keep jobs in merger with Mass. firm

The three top executives of Hudson-based Micronetics Inc. will keep their jobs as a result of the Hudson company’s merger with the much larger Mercury Computer Systems Inc. of Chelmsford, Mass., according to a recent preliminary proxy sent to Micronetics’ shareholders. But it’s still not clear what will happen to the remaining employees.
If the merger is approved, those shareholders will receive $14.80 a share. Micronetics will remain as a subsidiary of Mercury, headed by its current executives, CEO David Robbins, President Kevin Beals and chief financial officer Carl Lueders.The preliminary proxy didn’t disclose the date of the vote.The proxy also doesn’t clarify what will happen to the firms’ other employees. A Mercury executive declined comment on its future plans, and Micronetics did not return phone calls by NHBR deadline.When announced on June 10, the deal — which would combine two defense contractors — almost doubled the share price of Micronetics overnight.Micronetics designs and manufactures microwave and radio frequency subsystems and components for the defense industry and some commercial customers. Mercury manufactures and markets signal and image processing sub-systems and software for specialized defense and commercial computing markets.Mercury is the much larger entity, with shareholder equity of $325 million, compared to $18.7 million for Micronetics. Only Micronetics shareholders will have to approve the deal.Mercury first approached Micronetics back in April 2011, making its first offer in August of that year for $8 to $9 a share, an offer that the Micronetics board turned down flat. But that offer became the start of a bidding war that involved negotiations with seven other companies, two of which made several specific offers.That increased Mercury’s bid to as high as $15.50 a share. After due diligence, the two companies hammered out the current deal of $14.80 a share, for a total of about $71.7 million, plus the assumption of $3.7 million in debt. The board of directors, the top executives and one major shareholder pledged their shares — about 20 percent of the company all told — agreeing to a $2.5 million kill fee if Micronetics backed out of the deal and went with another buyer.The board and top executives support the merger, citing a recommendation by its consultant , Partners LLC, which said shareholders would benefit no matter which way the company is valued — former stock price, enterprise value, comparable mergers or the income it produces. Those benefits far exceeds the estimated $2.4 million in expenses for the deal (much of which would go toward Cypress’s fee.)But the proxy notes that both the Micronetics board and executives also have skin in the game, namely shares and options totaling $6.3 million. David Siegel, a board member, would get about $2.9 million, primarily for his shares, followed by Robbins ($1.8 million), Beals, (almost $800,000) and Lueders, more than $320,000.Noelle Kalin — wife of Richard S. Kalin, the company’s late chairman, CEO and president and the company’s largest shareholder — also pledged her half a million shares, about 12.5 percent of the company, for about $8.5 million.According to the proxy, Micronetics’ top three executives would get an additional $1.4 million in cash and equity if they are ousted by the merger – Robins $300,000, Beals $485,000 and Lueders $656,000 — but the proxy said in several places that they would keep their jobs.Robbins received $235,000 plus $100,000 last year. Beals’ base salary was $180,000, with a bonus of $90,000, and Lueders’ base salary was $180,000, plus $47,500, though in a letter dated June 8, he is entitled to receive another $180,000 bonus on March 7, or the date of the merger or if he is terminated, whichever comes first.Seven shareholder litigation firms have announced investigations into the merger.On Monday, Levi & Korsinsky, said it filed a suit in Delaware state court, claiming that shareholders were not getting the best value for the deal. The proxy also alluded to a similar class action suit filed on June 15 in Delaware’s Court of Chancery, but it is not clear whether that is the same litigation. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

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