Shareholder Believes Stewart & Stevenson Can Get Better Deal

Defense Daily, May 12, 2006 by Calvin Biesecker

By Calvin Biesecker

An investment firm that holds a small stake in Stewart & Stevenson [SVC] wants the company's board of directors to seek from Armor Holdings [AH], which has an agreement to buy the maker of Army trucks, a waiver to the acquisition terms that would allow for additional bids with the hope that it and other shareholders could get a higher offer price.

Noting that Stewart & Stevenson's shareholders failed to approve the purchase by Armor Holdings earlier this week, the investment firm, Arnhold and S. Bleichroeder Advisers, wrote to Stewart & Stevenson's chairman yesterday: "We believe this reflects your shareholders' natural reluctance to support a sale of the company when a better deal at a higher price may well be available."

The investment firm owns about 1.4 percent of Stewart & Stevenson.

During an auction process earlier this year, Armor Holdings eventually bid $35 per share for Stewart & Stevenson, 50 cents short of the highest bid, but one that Stewart & Stevenson's board believed would work. Oshkosh Truck [OSK] was the high bidder but Stewart & Stevenson indicated in proxy filings with corporate regulators that it believed that deal wouldn't pass regulatory muster since the two companies are competitors in the military truck market. The two are the only firms providing medium-payload trucks to the U.S. military.

Oshkosh is currently prevented from making another offer for Stewart & Stevenson due to a standstill provision it agreed to in the bidding process that aims to get the best offers from potential buyers to avoid a hostile takeover bid submitted at a later time. Industry officials say those provisions don't hold up well for companies incorporated in Delaware, but Stewart & Stevenson is incorporated in Texas, where Oshkosh might face litigation if it breaks the agreement.

Investors apparently feel that a better deal price could be forthcoming. Stewart & Stevenson's stock is trading above the deal price agreed to by Armor Holdings. The stock closed at $35.72 yesterday.

[Copyright 2006 Access Intelligence, LLC. All rights reserved.]

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