Deal reporter
American Science & Engineering (NASDAQ:ASEI), a Billerica, Massachusetts-based inspection and detection products company, is reconsidering a sale, according to an industry source and sector advisor.
According to the industry source, AS&E has been talking to investment bankers about the possibility of a sale. The industry source and sector advisor said, to their knowledge, the company is not currently running an auction.
AS&E, which has a USD 294m market capitalization, did not return calls for comment.
Last October, AS&E shareholder Willner Capital called on the company to hire an investment bank to explore strategic options.
AS&E was last reported by this news service to have considered a sale in January 2012 alongside then financial advisor Credit Suisse. It was further reported that the effort did not yield a transaction, in part, given the company’s rich price expectations.
Earlier this month, AS&E announced a realignment of the company into two focused business units: Detection Products and Detection Services.
The industry source and sector advisor said this internal restructuring could make AS&E more appealing in the event of a sale. According to the company, the realignment is expected to generate annual cost savings of about USD 6m. The industry source said by eliminating costs, AS&E could command a higher price if it sold.
The company may be weighing a potential sale in light of its recent stock performance, said the industry source. AS&E was trading at USD 41.12 per share early Thursday, compared to a, respective, 52-week low and high of USD 36.32 and USD 72.73.
Its share price took a hit in late April after announcing it received a subpoena from the Office of the Inspector General of the US General Services Administration (GSA) on 17 April, relating to an investigation by the GSA and the Department of Defense of its compliance with the terms and conditions of its contractual arrangements with the GSA. AS&E’s stock tumbled 21% on the news.
Potential buyers of AS&E could include x-ray inspection companies with a Transportation Security Administration (TSA) presence, the industry source and sector advisor said. They pointed to L-3 Communications (NYSE:LLL) as one company that could look at AS&E to strengthen its detection presence. France-based aerospace and defense group, Safran (EPA:SAF), was also named as a potential buyer for AS&E in a previous report by this news service.
AS&E had USD 126.8m in revenue for the fiscal year ending 31 March 2015, down 33% from USD 190.2m in sales for the same period a year prior.
In its 4Q15 earnings call last month, AS&E CFO Ken Galaznik attributed the decline in sales to a decrease across all product lines. On the same call, CEO Chuck Dougherty added that fiscal 2015 proved challenging due to a number of market conditions. He touched on large cargo projects, with AS&E experiencing continued delays based on market dynamics such as administration changes, political unrest and construction delays especially in the Middle East.