Romi Raps Hardinge Board as Deadline Looms

June 18, 2010
Execs dispute strategies, outlook with proposed machine-tool merger on the brink

With its extended cash-tender offer due to expire June 18, Brazilian machine tool maker Industrias Romi S.A. is rapping the management of its takeover target, questioning the administrative and strategic skills of the Hardinge Inc. directors. But, having called its $10/share offer final, it’s possible that Romi will fall short of a collecting enough shares to seal the takeover it has fought over six months to complete.

“Romi stands ready to negotiate a transaction,” the company’s CEO Livaldo Aguiar dos Santos declared in a statement. “We continue to believe that the combination of Romi and Hardinge is in the best interests of Hardinge’s employees, customers and partners. However, as we have said previously, absent a significant increase in shareholder support above the 38% previously tendered, we intend to let our offer expire at the end of the offering period on June 18, 2010.”

Romi is offering $10/share in cash for outstanding shares of Hardinge.

The pursuit of Hardinge began last fall, but Romi failed to convince the company’s directors to engage in merger discussions. Finally, in March, Romi launched an $8/share cash-tender offer, later increasing that offer to $10/share and extending it for six weeks.

Romi manufactures machine tools, plastic injection, and blow molding machines, and also produces component parts made of gray and ductile iron. Throughout the process it has argued that combining its assets with those of Hardinge will form an organization that is better suited to compete in the global machine tool market.

Hardinge, of Elmira, NY, produces vertical and horizontal machining centers, CNC lathes, grinding tools, and workholding equipment. Its brands include the Hardinge, Kellenberger, Bridgeport, Hauser, and Tschudin product lines.

Harding continues to urge shareholders to reject the offer, and has argued that its ongoing restructuring is preparing the group to benefit from a recovery in the manufacturing sector.

This week Hardinge revised upward its order guidance for the quarter ending June 30, 2010, from $60 million-$65 million to more than $80 million. And, it said it has booked approximately $23 million in a new order from a Chinese consumer electronics company, but it said the margins on that order will be lower than usual because of a “highly competitive environment that still exists for machine tools.”

But, the company also said second-quarter sales are likely to fall to about $55 million due to supply-chain difficulties.

“Hardinge now expects to fail to meet guidance just provided to shareholders in May 2010, casting doubt on management’s ability to deliver on projections and reinforcing our belief that Hardinge’s current standalone business model will deliver neither the certainty nor the value of Romi’s $10.00 per share all-cash offer,” said dos Santos.

He continued: “In addition, Hardinge has disclosed that, in the face of competition in the machine tools industry, it has agreed to at least one large order at lower than traditional margins, without which Hardinge’s order volume would be relatively flat compared with last quarter.

“Hardinge is now projecting that second quarter 2010 sales will show no improvement from 2009 levels,” the Romi CEO concluded. “As such, we have serious doubts about Hardinge’s ability to participate in the expected economic recovery, especially in light of Hardinge’s ineffective management of its supply chain, the volatility in the financial markets, and renewed uncertainty about the timing and strength of a recovery.”

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