ECC International: Ripe for a Takeover
By Gene G. Marcial
While most defense stocks have fallen since midyear, arms maker ECC International (ECC ) continues to fly high. When featured in this column on May 6, 2002, the stock was at 3.20. Buoyed by a profit turnaround and takeover talk, ECC reached 4.90 on Dec. 11 before easing to 4.17 on Jan. 8. A takeover may soon come to pass, say people close to ECC. Last year, ECC formed an internal panel to explore a possible sale. When nothing materialized, CEO James Garrett was replaced by James Henderson of Steel Partners, which owns 29% of ECC.
Steel Partners has a history of maximizing the value of its companies and then selling them. Henderson was CEO of Aydin when Steel Partners sold it to L-3 Communications (LLL ). So the buzz is that ECC will end up in a similar sale--to L-3 or DRS Technologies (DRS ), now on a buying binge. One investor says ECC is worth 10 in a buyout. ECC earned 11 cents a share in the quarter ended Sept. 30, vs. a loss of 7 cents last year. Trailing 12-month earnings are 56 cents a share, for a low price-earnings ratio of 7.6. ECC has a book value of $3.54 a share and no debt.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.