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August 31, 1988

GOULD TO GO TO JAPANESE PARTNER NIPPON STEEL FOR $1,100m

By CBR Staff Writer

Gould Inc has effectively been up for sale for about three years now, but the company that has moved in for the Rolling Meadows, Illinois diversified electronics concern is still a surprise: where a European, either Siemens AG or GEC Plc, had been widely expected, the suitor turns out to be Gould’s long-standing Japanese partner, energetically diversifying Nippon Mining Co Ltd. Gould, which approached the Japanese firm to propose the acquisition, signed up with Nippon Mining as long ago as 1981, in an agreement that led to the creation of the Nippon Gould Foil Co joint venture making copper foil. In 1985, the Japanese firm took on its fibre optic components for 19 Far East markets (CI No 337), and it was in July this year that the two formalised their relationship in computers with the creation of Nippon Gould Computer Co Ltd (CI No 981). Under the agreement announced just before the New York market closed on Tuesday, Nippon Mining will pay $23.25 a share for Gould’s 45m shares outstanding – a premium of $7.625 over the market price before the bid – valuing the company at about $1,100m, nearly two times its book value. The Computer Systems business is now one of the largest in the group, accounting for about two fifths of the $761.4m annual turnover restated for disposals from the $933.4m reported at the end of last year, and down from some $2,000m before Gould began its spate of divestitures – and if the bid succeeds, this will be the first time a major US minicomputer manufacturer has fallen to a Japanese company. But a substantial proportion of Gould’s business is still defence-related, and although the Defense Department has approved the deal, it is not clear that all US agencies will allow the company to pass into foreign ownership: under the agreement with the Pentagon, Gould’s NavCom Systems business will be put into a trust to be run by current management, and Nippon Mining has agreed to sell it, but it is not certain that this will be enough to satisfy the US. As Japanese companies go, Nippon Mining is by no means a giant, doing $60m net on sales of $6,500m last year – and it has only 6,000 people in its metals, petroleum refining, petrochemicals and opto-electronics manufacturing businesses, while Gould still employed 10,000 people at the last count, although that may have been before the most recent divestitures. Although Nip pon Steel wants Gould’s materials and components units, it is not certain it will keep the minicomp uter or test and measurement arms.

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