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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