Sipex files for 3M-share offer

Electronic News, July 8, 1996

Billerica, Mass.--Sipex Corp. has filed with the Securities and Exchange Commission for a public offer of 3,000,000 common shares, with 1,000,000 to be sold by the company and 2,000,000 by certain stockholders.

Underwriters, who may buy up to 450,000 additional shares for over-allotments, will be led by Alex. Brown & Sons, UBS Securities LLC, and Adams, Harkness & Hill.

Net proceeds will be used for working capital and other general corporate purposes; the company will not receive proceeds from the sale of shares by stockholders, it said.

Sipex recently reported 1Q96 revenues grew 35 percent to $8.5 million year-over-year and 6 percent sequentially. Fully taxed earnings per share were 6 cents, up 100 percent sequentially. Alex. Brown & Sons, which has a "buy" on the shares, estimates 38 cents growth for 1996 and 70 cents for 1997. The 12-month target price is $21.

Sipex specializes in analog ICs serving the analog signal processing market and three target market sectors, data com and telecom, battery powered/portable products and industrial controls/instrumentation. There are three primary product lines: interface circuits, low-power applications-specific analog circuits and data converters.

"Sipex is a multiple transition story that we believe will show quarter to quarter improvement in revenue, earnings and profit margin for at least the next two years," noted Alex. Brown in a late April report. "The first transition is from military to commercial end markets. In 1Q95, Sipex derived 30 percent of sales from military applications, while in 1Q96 military only accounted for 12 percent of sales. During this period, commercial products grew more than 70 percent year-over-year.

"The second transition is from second-source product to proprietary products. During the recently completed March quarter, Sipex derived about 18 percent of sales from proprietary products, while bookings during the same quarter were comprised of 33 percent proprietary products. It is our belief that these transitions will continue over the next two years and result in accelerated earnings growth," the report said.

Primary competitors are Analog Devices, Linear Technology and Maxim Integrated products.

End market consumption for Sipex products breaks down as follows, according to the Alex. Brown report: communications, 34 percent; consumer, 25 percent; industrial controls, 10 percent; personal computers, 8 percent; military and other, 23 percent.