KUHN CAPITAL Wednesday, December 13, 2017
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Another Tech Services Hostile Takeover Attempt

May 30

Before the PeopleSoft/Oracle affair, Aquent, a rapidly-growing Boston-based $300 million staffing firm controlled by CEO John Chuang, acquired two board seats at Computer Horizons, and is pressing the tech services vendor to accept its $146 million hostile bid.

NJ-based Computer Horizons, with a market cap of $147 million and sales of about $280 million, has been bleeding red ink while hoarding $70 million in cash, a classic takeover recipe. The company’s 1999 sales were $535 million.

Naturally, Computer Horizons management, headed by 77-year old Tom Berry, is litigating the matter, claiming that the proxy vote campaign materials Aquent used to win its board seats were “misleading”. One of the board seats changing hands would be Berry’s.

Meanwhile, Computer Horizons is simultaneously exploring a transaction with another tech staffing firm in order to diminish the attractiveness of its balance sheet and preserve incumbent managers’ jobs.

We have been anticipating the emergence of hostile tech service firm takeover attempts as the tech recession drags one. Companies with large cash holdings and lengthening histories of declining sales and profitability are particularly vulnerable, as -- in our opinion -- they should be. The battle-scarred investors in struggling tech services companies deserve the chance to exit, freeing the trapped cash on the company’s balance sheet for more productive uses, or at least to welcome a change of the guard.


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