The corporate war is not over.
At stake: control of one of California’s oldest companies.
Undeterred by rejection of its $878 million buyout offer for Ducommun Inc. (NYSE: DCO) earlier this month, private equity firm Albion River LLC said it’s taking its case directly to shareholders of the Santa Ana-based aerospace and defense company that traces its origin to California’s gold rush.
“Albion continues to believe that public markets are not an appropriate setting for Ducommun to execute its strategy and maximize shareholder value,” the suburban Washington-based acquirer of technical defense industry companies said in an April 22 statement. “We are committed long-term shareholders of the company and intend to make our case directly to shareholders in due time.”
Albion said in the statement that it owned more than 9.2% of Ducommun’s outstanding stock and was continuing to acquire shares.
Ducommun had said previously, in a statement rejecting Albion River’s bid, that the “initial proposal undervalues Ducommun and does not fully reflect the company’s proven, long-term growth initiatives.”
Ducommun’s management said it would stay its path. It projected approximately 33% growth in revenue, to as much as $1 billion by 2027, from last year’s $757 million.
In an earnings call in February, Ducommun Chief Financial Officer Suman Mookerji told stock analysts that the company’s 2023 revenue had grown 6.2% over the previous year, and emphasized hefty backlog of business.
Chief Executive Stephen Oswald chimed in that “the future is very bright.” However, although I have acknowledged that “we’re getting pinched here and there a little bit.” That little bit includes an 88% plunge in net income to $15.9 million in 2023 from $135.5 million in 2021.
Share Roller Coaster
The markets suggest shareholders may be open to Albion’s offer.
When Ducommun’s management announced Albion’s initial $60 a share buyout offer on April 8, the company’s stock price jumped from under $49 a share to almost $57. It fell to below $52 on news Ducommun’s management was rebuffing the offer.
Since Albion’s subsequent announcement that it would be taking its case directly to shareholders, Ducommun’s stock climbed back up to about $54 as of April 25.
Deep Heritage
In the 175 years since Ducommun’s beginnings as a single store, Ducommun has evolved into a defense and aerospace company whose major customers include RTX Corp. (NYSE: RTX), The Boeing Co. (NYSE: BA) and European aerospace company Airbus.
Ducommun has played roles in the Boeing 737 Max, the US military’s Apache helicopters, the F-35 combat aircraft and the MIRV missiles.
Ducommun Predates the State of California
Ducommun Inc. celebrates its 175th anniversary this year. Its lineage goes back to the gold rush of 1849, one year before California became a state.
The company’s founder was Charles Ducommun, an immigrant from Switzerland.
“Evolving from a hardware supply store opened by Charles Ducommun in Los Angeles during the California gold rush, the company assisted in the birth of the aerospace industry in Southern California by providing aircraft aluminum to early aerospace pioneers like Lindbergh, Douglas and Lockheed,” the company says on its website.
Lindbergh was Charles Lindbergh, who became the first person to fly nonstop across the Atlantic, in a historic achievement almost a century ago—when Ducommun had already been in business for 78 years.
Ducommun began by outfitting prospectors with hardware and sundries during the gold rush.
The company now specializes in two core areas—electronic systems and structural systems—to produce complex products and components for commercial aircraft platforms, mission-critical military and space programs, and sophisticated industrial applications.
Ducommun (NYSE: DCO) went public in 1946.
