IDS bids for Scintrex — Ottawa firm looks to new markets

Ottawa-based chemical detection technology firm Intelligent Detection Systems (IDS) has offered to acquire all the issued and outstanding shares of Concord, Ont.-based instrumentation manufacturer Scintrex for $18 per share.

The offer, which was mailed to shareholders in mid-April, represents a revision to the intended offer announced earlier in the month. The per-share value under the revised offer is $3 higher, and Scintrex shareholders now have the opportunity to receive for each Scintrex share, at the holder’s option, either 2.323 IDS shares (based on an IDS share value of $7.75) or a combination of $9 cash plus 1.1615 IDS shares.

The offer is subject to a maximum of $18 million being paid for the cash portion of the offer; if holders of Scintrex shares elect to receive, in aggregate, more than this amount in cash, then the amount of cash payable to such shareholders will be reduced on a pro rata basis and the number of IDS shares correspondingly increased.

IDS, which held 2,400 Scintrex shares prior to the offer, has entered into lock-up agreements with three institutional shareholders holding a total of 537,200 shares, or 19.9% of the issued and outstanding shares of Scintrex.

The lock-up agreements provide that if a competing offer exceeding $19.50 per share is made, the institutional shareholders are permitted to withdraw their shares from the IDS offer unless IDS matches the competing offer within a specified period.

The offer is conditional upon, among other things, at least two-thirds of the Scintrex shares and rights (calculated on a fully diluted basis) being deposited with the offer, and upon the termination or waiver of the application of the Scintrex’s shareholder rights plan and the receipt of applicable regulatory approvals.

The offer will be open for acceptance until May 7.

In announcing its bid, IDS states that Scintrex will provide it with the ability to leverage its existing core technology into new markets, specifically, industrial process control and earth sciences. IDS plans to combine the security and nucleonics divisions of Scintrex with IDS’s chemical detection division, such that IDS would become a dominant player for chemical detection equipment in the security and nuclear industries.

IDS’s strategy also involves targeting its chemical detection products for application in the environmental and mining industries.

IDS states, “The earth science division of Scintrex would fit this objective, as Scintrex is considered one of the leaders for chemical detection equipment in the mining and environmental industries.” Scintrex has retained Gordon Capital and First Marathon Securities to assist in assessing the IDS offer.