ECC: A Weapons Sale Ahead?

A small arms maker, ECC International (ECC ) has a roster of big clients, including Raytheon, Lockheed Martin, and the Pentagon itself. ECC makes simulators for training personnel to operate weapons systems. One recent order for small-arms systems came from Israel.

Other defense stocks have soared since September 11, but ECC has languished--until recently, that is. It has risen from 2.60 on Apr. 1 to 3.20 on Apr. 24. The reason: Steel Partners, which owns 29% of ECC, is said to be pressing the company to put itself on the block. Adding credibility to the rumor: Steel Partners pushed another military company, United Industrial, in which it owns 10%, to put itself up for sale last month. United Industrial was featured in this column on Feb. 11. ECC has formed a committee to explore ways "to enhance value, including a potential sale of the company," says a 10Q filing with the Securities & Exchange Commission dated Feb. 14. ECC has a book value of $3 a share and $1.40 a share in working capital, with no long-term debt. ECC also has $1.75 a share in net federal operating tax-loss carryforwards, which could be valuable to a potential buyer. One big investor close to ECC puts its worth at 7 a share, based on defense stocks' p-e range of 25 to 30. In the red last year, ECC is projected to earn 8 cents to 13 cents a share in fiscal 2002 ending June 30, and 25 cents to 30 cents in fiscal 2003, according to that pro.

By Gene G. Marcial

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