Shares of Melbourne, Fla.-based Harris traded down more than 15%, or $10, to $55.77 on Monday after the company put out a statement responding to rumors that it was in discussions. The company squashed that talk.
Harris CEO Howard Lance said that while the company is approached from time to time, "we believe our focus on continuing growth through the introduction of industry-leading new products, expansion of addressable markets, development of new capabilities, international expansion and strategic acquisitions will deliver significant value."
Though the company did not give details, reports last week indicated that Harris had received initial expressions of interest of about $70 per share, below the $75 to $80 per share price the company's board had hoped to fetch in an auction. Defense contractors Northrop Grumman Corp. and General Dynamics Corp. were believed to be among the interested parties, eager to add Harris' well-regarded business providing high-tech communications technologies to the U.S. military.
Harris' board might think the company is worth $75 per share, but investors do not appear willing to wait patiently. The drastic share decline Monday could open the company up to shareholder criticism or even a hostile bid at or around the $70 per share mark. Insiders own just 6% of Harris, according to Yahoo! data, with institutional investors and mutual funds holding about 90% of the company's float.
Sources watching Harris say, given the sensitivity of the business the company does for the U.S. government and the conservative nature of Harris' traditional shareholder base, a hostile bid seems unlikely. But if nothing else, the board has to take notice that shareholders have responded to its decision by racing for the exits. The company might find it harder to say "no" the next time a potential suitor makes a $70 per share offer. - Lou Whiteman
See TheDeal.com story on Harris' announcement it is not in talks
