Lots of local players are involved in the leveraged management buyout of El Segundo-based Wyle Laboratories Inc., one of the leading high-tech testing and technical support companies.
Advising Wyle management was John Mavredakis, managing director with Century City-based Houlihan Lokey Howard & Zukin, the finance shop. Mavredakis helped engineer a deal in which Wyle executives and engineers bought out Westside merchant bank William E. Simon & Sons LLC's equity stake, assisted by debt financing provided in part by Beverly Hills-based Libra Mezzanine Partners, a unit of U.S. Bancorp. Libra will take a small equity stake in Wyle too.
"This was a satisfying deal, because we had the chance to help some real people," said Mavredakis. "By coming up with the structure and financing, we helped management buy the company, and take control of their destiny, so to speak," said Mavredakis, who also noted that a "big group" of Wyle employees participated in the buyout.
Privately held Wyle, founded in 1950, has been growing; annual revenues more than doubled to $140 million in the past four years, and it now employs 1,400 people at 13 major testing locations nationwide. Last year was the company's best ever, officials said in a prepared statement.
Mavredakis will take a seat on Wyle's board, and provide ongoing financial advice to the company. Is there an initial public offering in the offing? "I wouldn't rule that out," said Mavredakis. "This is a terrific company."
Ken Luskin is a breed of money manager one used to see more of before blue chips and tech stocks sucked the oxygen out of the room for all other kinds of stocks: That is, a manager who assembles a stake in a small- or mid-cap company with a good story, and who then patiently waits for Wall Street to discover the gem-in-the-rough.
Now, finally, the mid-caps and even small caps are outperforming the blue chips. A change may be in the winds.
Moreover, Luskin recently earned some bragging rights when he advised (in this column) buying Alhambra-based Ortel Corp. in the $6-a-share range. The stock ended up trading at more than $180 a share, before being bought at about $160 by Lucent Technologies Inc.
OK, that's nice, but what's the encore? Now Luskin likes a little stock named Conceptus Inc., so much so that his money management shop, Malibu-based Intrinsic Value Asset Management, has filed papers with the Securities and Exchange Commission and taken a 17 percent stake in the company, but has no plans to take control or board seats.
The smallish, not-yet-profitable Conceptus (market capitalization of $60 million) has a new, lower-cost, minimally invasive method of permanent birth control, already being sold commercially in Europe and Asia. In the United States, the company has successfully completed the first- and second-phase FDA-mandated testing of the procedure, which involves placing a small coil in the fallopian tubes, in an outpatient procedure. Third (and final) phase testing is slated to begin soon.
"The Conceptus method costs about one-third as much" as a tubal ligation, said Luskin. "And we know from watching FDA testing announcements, no one else has a product going to market like this."
All over the world, women need and want an inexpensive method of permanent birth control, which has no side-effects, said Luskin.
But small biotech companies are a dime a dozen, and usually they need the marketing and distribution heft of a big outfit to penetrate world markets. Is a merger on horizon for Conceptus? "Well, you might see that here," said Luskin. "But I wouldn't vote to sell this stock for anything less than $50." As of last week, it was selling for about $5.25 a share.
With a growing portion of the San Carlos-based Conceptus stock in his hands, it may indeed be Luskin who becomes arbiter of when to sell Conceptus.
Day Trader Bio-Fever
As widely noted, sometimes the prices of "hot" stocks seem driven not by the powers that be on Wall Street the brokerages and huge institutional traders such as the mutual funds but by trigger-happy day traders, in frenetic rooms far from New York City.
One of the biggest day-trading shops in Los Angeles is Cornerstone Securities in Westwood, which operates under the tutelage of Albert "Bud" Kruger, branch manager.
So what do the momentum-seeking day traders like now? "Day traders like anything that is volatile, or which has momentum," said Kruger. "For awhile it was oil stocks, but now I think biotech is making a comeback."
For the last couple of years Internet stocks have captured the day trader's fancy, especially Internet initial public offerings, where 500 percent first-day run-ups are not uncommon. Perennial favorites among day traders are big-cap tech stocks such as Intel Corp., Cisco Systems and Microsoft Corp., which tend to move around a lot (pointwise), and which are very liquid.
But the Internet companies may be headed for a period of consolidation. Meanwhile, "several biotech companies have products coming down the pipeline," said Kruger. "It's going to be an industry to watch."
Kruger's advice for day traders, and anyone else playing Wall Street: "You have to have an exit strategy, thought out and in place before you get in," he said. "You have to be ready to sell. Everybody will get into a few deals that are disasters, and you have to be ready to cut the cord when a certain point is reached."
Yes, the junk bond market had higher default rates in 1999 than the previous five years, but don't lose your load yet, advises Howard Marks, chairman of Oaktree Capital Management in downtown Los Angeles, a $16 billion high-yield securities and bond shop. "The default rate rose to 4 percent last year, after running at 2.3 percent from 1993 through 1998. But we have kept the default rate in our portfolio below the overall rate. It's a market that calls for analysis," said Marks. "I am not alarmed. I select carefully. The right bonds are good buys."...
Jeff Rollert, chairman of the $300-million-under-management Pasadena-based bond shop ALM Advisors Inc., picked up a new account the Philadelphia-based Quaker Fixed Income Fund. So many buyers of corporate bonds are either buying short-term IOUs or longer-term bonds (more than 10 years) that the risk-averse Rollert now likes five-year bonds, which are slightly undervalued, he says.
Contributing Columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached email@example.com
For reprint and licensing requests for this article, CLICK HERE.