Is Fairchild In The Catbird Seat?

After languishing for some time at around $5 a share, Fairchild got a badly needed boost in early February when a British group made an unsolicited $14-a-share bid for the diversified aerospace-products company, formerly known as Banner Industries. Within days, Fairchild's stock jumped from 7 3/4 to 10 1/4. But in less than a month, Fairchild had broken off talks with London's Mountleigh Group, and the stock fell as low as 7 by mid-April.

Recently, however, the stock has started to pick up again, rising to 8 5/8, in part because of rumors that a bid from another suitor is imminent. Fairchild Chairman and CEO Jeff Steiner has been buying shares since rejecting the Mountleigh bid, and he has now accumulated a 44.5% stake.

One New York money manager says the aborted Mountleigh deal has called attention to Fairchild as takeover bait and says the company is grossly undervalued. Fairchild has three core units: The aerospace division makes fasteners for aircraft manufacturers and airlines; the D-M-E division produces tooling and electronic control systems for the plastics-molding industry; and the communications unit provides centralized telecommunications for commercial buildings.

Fairchild also has a 47.2% stake in Banner Aerospace, a distributor of replacement parts for the aviation industry, and a 40% interest in Rexnord, a maker of power-transmission components. Together, says the pro, Fairchild's assets are worth $385 million, net of debt, or a cool $22 a share. In a takeover, of course, the company would be worth even more. A Fairchild spokesperson says the board will consider any bona fide bid, but the company's immediate objective is rapid growth, cost-cutting, and reduction of its $360 million debt.