Shares of Hunt Valley-based Tessco Technologies Inc. jumped 23 percent Thursday on news that its largest shareholder wants to buy all of the company’s stock.
On Wednesday, Discovery Group Holding Company LLC, a Chicago-based investment firm, sent a letter to Tessco’s management conveying its interest in buying all remaining shares of the company for $15.50 per share. Discovery said this price was a 30.8 percent premium to the closing price of the stock on Sept. 21.
News of the bid sent shares of Tessco, which sells equipment to deploy and support wireless systems, soaring to $15.18, up $2.84 — a 23 percent increase. Trade volume was about four times above normal and share prices had reached as high as $15.75 throughout the day.
Discovery Group Managing Partner Daniel J. Donoghue told Tessco that the company would like to close on the deal as soon as possible. But, he said, Discovery Group would not seek exclusivity and acknowledged Tessco might receive better offers.
“We are confident in the competitiveness of our proposal, but understand that before the Board forms any conclusion as to the adequacy of our proposal, it will likely feel compelled to hire an investment banker to conduct a formal market check to verify whether there are any better potential offers,” Donoghue wrote.
Pointing out the need for hiring an investment bank or seeking better offers harkens back to an earlier disagreement between the companies. In a letter Discovery sent to Tessco in March, it took Tessco to task for not responding to buyout offers from interested parties. Discovery said Tessco’s behavior sent the message that the company was not open for sale or merger.
In the letter, Discovery Group criticized Tessco’s board of directors for adopting a “poison pill” anti-takeover clause. Discovery said in one case, Brightpoint Inc. bought 9.9 percent of Tessco and tried unsuccessfully to open discussions with the company for acquisition. Discovery said in the filing that Tessco nixed any further attempt when it repurchased the Brightpoint shares, “an offer that was not likewise extended to other shareholders.”
“As a large distributor of cellular equipment, Brightpoint is a credible strategic acquirer of TESSCO,” Discovery Group wrote in the March letter. “We believe that the threat that management might lose control of the Company to Brightpoint was the catalyst for establishing the poison pill. The Board’s action signaled to Brightpoint, and all other potential suitors, that the leadership at TESSCO was not amenable to a transaction.”
Calls to Tessco and Discovery Group were not returned.