Seeking to expand its product line, Northbrook-based General Binding Corp. said Monday it plans to acquire VeloBindInc. of Fremont, Calif., for $9.77 a share, or about $50 million.
The disclosure of the definitive merger agreement, which was reached Saturday by the two firms, caps a week of takeover speculation about VeloBind. After heavy trading in its stock on Sept. 17, VeloBind revealed it was engaged in takeover talks with a party it didn`t identify.
The speculation pushed VeloBind`s stock price up $1.50, to $9 a share, last week. In over-the-counter trading Monday, VeloBind closed at $8.75, slipping 25 cents to reflect a projected late December completion of the transaction. General Binding closed off $1.25 at $15.75, also trading over the counter.
Joseph LaPorte, a General Binding vice president, said the $50 million deal would represent his firm`s largest acquisition. He said plans are to finance the deal with bank debt.
The agreement must be approved by VeloBind shareholders and government regulators.
General Binding makes binding, laminating, and paper-shredding systems used in the business, commercial, education and government markets. One of its principal binding methods uses plastic curlicued through hole-punched paper, allowing the bound document to lie flat when opened.
LaPorte said VeloBind uses strip binding, in which documents are held together by strips of plastic on the front and back edge. The bound material doesn`t lie flat when open.
In a statement, General Binding President Rudolph Grua noted that the VeloBind binding systems ”utilize proprietary supplies, fitting well with
(General Binding`s) emphasis on developing and marketing machines which consume company-patented supplies.”
In 1989, VeloBind earned $967,000, or 20 cents a share, on revenues of $41.1 million. For the six months of this year, it earned $694,000, or 15 cents a share, on revenues of $21.6 million.
In 1989, General Binding earned $20.1 million, or $1.26 a share, on revenues of $283.7 million. In the first six months of this year, it earned $8.9 million, or 56 cents a share, on revenues of $13.9 million.
