Why There's Lavish Buying Of LadishBy
Two major shareholders of Ladish (LDSH) have been buying more shares in the open market of this Cudahy (Wis.)-based company. Ladish is a large maker of technically advanced components for the jet-engine, aerospace, and industrial markets. Its three biggest customers are General Electric, Rolls-Royce, and United Technologies. One big Ladish shareholder is the Employees Retirement Plan of Consolidated Electrical Distributors, which has accumulated a stake of more than 5%. But that is dwarfed by Grace Brothers, a private investment group in Chicago, which has built up a 25% stake. One reason behind Grace Brothers' move has to do with Ladish's largest competitor, Wyman-Gordon, which has recently been acquired by Precision Castparts at $20 a share--or about 10 times its cash flow. Grace Brothers is betting that Ladish will end up getting acquired, as well.
Based on the purchase price of Wyman-Gordon, Ladish's valuation should be in the teens, says Brad Whitmore, a general partner at Grace Brothers. "We think it won't be long before somebody makes a run for Ladish." Now at 61 5/16 a share, Ladish trades at around 5.3 times estimated 1999 cash flow. Whitmore says Grace Brothers will press management to take steps to maximize shareholder value, including selling the company. Ladish CEO Wayne Larsen says the board will consider any bid--if it gets one. "We haven't been approached," he adds.
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