planarhq.JPG
Planar's headquarters in Hillsboro. The company announced last month it planned to sell the business, but investors appear skeptical.
(Planar image, via Wikimedia Commons)
Ongoing turmoil in the Chinese financial markets may be threatening Planar Systems' planned, $157 million sale.
The Hillsboro electronic display company announced August 13 that it planned to sell the business to a Chinese company, Leyard Optoelectronic Co., for $6.58 a share in cash. Planar's shares spiked on the news, jumping from $4.65 on August 12 to as high as $6.25.
Since then, though, Planar's share price has steadily fallen. Shares closed Wednesday at $5.53, 16 percent below Leyard's offer price.
It's common for shares in an acquisition target to trade below an offer price, even after a sale is announced: Every deal has some degree of uncertainty, and it takes time to close a transaction. (Planar and Leyard said they planned to complete their deal by the end of 2015.)
But the differences are typically small, and get smaller as the closing date approaches. The widening spread between Planar's share price and Leyard's offer suggests something more is at work.
"That's such a large discount there has to be concerns out there that this deal may not close," said Thomas Diffely, a senior research analyst with D.A. Davidson in Lake Oswego. Diffely doesn't track Planar specifically, but is a veteran stock analyst who has spent years observing the financial markets.
Neither Leyard nor Planar responded to requests for comment, but Diffely said the troubled Chinese economy may be a factor.
"There's a lot of concern right now just about China in general," he said.
Chinese stocks, which slumped all spring, went into a dive over the summer. The broad selloff was triggered by a widespread perception that companies there were grossly overvalued and, later, by growing fears that China may be facing a sharp economic slowdown.
To date, the Shanghai composite index is off 37 percent since June. Trading in some companies has been halted -- including, apparently, Leyard. The Shenzhen Stock Exchange has reported no trades in Leyard's stock since July, which was before the Planar deal.
In a regulatory filing outlining terms of the transaction, Leyard wrote that it was contemplating funding all or part of the Planar acquisition through a private sale of Leyard's own stock.
There is no direct evidence the deal is in jeopardy, and Planar's fading share price may simply reflect investor jitters over China.
Terms of Planar's sale require the Hillsboro company to pay Leyard $4 million if it calls off the deal because of a better offer; Leyard must pay $8 million if it is unable to complete its portion of the deal. The sale agreement required Leyard to place $8 million in escrow to cover that fee.
Planar had 240 to 250 employees in Hillsboro at the time of its deal with Leyard. The company indicated it expected its headquarters would remain in Oregon and possibly expand as a standalone business owned by Leyard.
-- Mike Rogoway
mrogoway@oregonian.com
503-294-7699
@rogoway