Tecumseh Products Company
(NDAQ: TECUA) may provide relief from the heat for its customers, but
its shares are quickly heating up. Stock in the hermetic compressor
manufacturer rose nearly 15 percent in early trading after a large
shareholder suggested that the company put itself up for sale in a Schedule 13D/A filing
with the SEC. The move comes after some tension between the two parties
and is seen as a logical next step. So, should you buy some TECUA while
it’s in play?
The Herrick Foundation owns approximately 17.5% of Tecumseh in the
form of a charitable trust. The Foundation’s relationship with the
company turned sour last March when it sued the company for governance
disputes. The two reached a settlement a month later that involved the
resignation of some board members and the installation of many new
ones. Among them, a representative from the Herrick Foundation that the
company must continue to nominate during the term of the settlement
agreement.
The strained relationship between the Herrick Foundation and
Tecumseh prompted the Foundation to explore ways to sell its stake.
Given the size, there is not an easy way to do this without a private
placement or substantial losses. As a result, the Foundation sent a
letter to the board demanding that it form a committee to explore the
possible sale of the company to strategic and/or financial buyers.
Meanwhile, the Foundation would approach potential buyers regarding
their interest in purchasing the Foundation’s shares or the company as
a whole.
The only roadblocks standing in the way of a potential deal are
poison pills, a Class A Protective Provision, and a few other
anti-takeover provisions. However, the large ownership stake in the
company and sympathetic directors on the board make this deal one that
is likely to see the light of day. Combined, these factors make TECUA a
stock worth watching closely as this situation progresses!
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