Monday, August 3, 2015

Sunoco, Vishay prepare for tax-free spinoffs of business units

Trading in the new Vishay Precision Group, which is based in Malvern, could begin by the end of the week.

Sunoco, Vishay prepare for tax-free spinoffs of business units

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Years can go by without Philadelphia-area companies spinning off operations into new, independent companies.

Last week brought news of two, planned by two of the region’s biggest publicly held companies.

First, Sunoco Inc. said it would spin off its SunCoke Energy unit in a tax-free transaction to Sunoco shareholders. The oil refiner and marketer said that deal wouldn’t be completed until the first half of 2011.

The second transaction is in the home stretch with Vishay Intertechnology Inc. close to completing a tax-free spin-off of its measurements and foil resistors businesses into an independent publicly traded company in the Philadelphia area.

Last October, Malvern-based Vishay announced plans to separate from what will become Vishay Precision Group Inc. because it was “not core” to its electronic components business.

What’s interesting is that in doing so, Vishay would exit its original line of business based on the invention of Felix Zandman, who started Vishay in 1962. Zandman, 81, is still executive chairman of Vishay.

Back in the 1950s, Zandman was issued patents for technology that could reveal and measure stresses on airplanes, cars and other structures, according to a filing with the Securities and Exchange Commission. His research led him to develop a line of high-performance foil resistors - the foundation of Vishay.

But Vishay didn’t grow to more than $2 billion in annual sales by selling only resistors and strain gauges. In 1985, Vishay began a series of acquisitions that added other “passive” electronic components to its resistor lines. In the late ’90s, the company bought its way into the top ranks of the largest semiconductor manufacturers.

In March 2009, Vishay management suggested its board consider spinning off the original business, which had grown over the years as a result of purchases of transducer manufacturers.

Vishay Precision Group is a much smaller company than its soon-to-be-ex-parent. It had net revenues of $172 million in 2009, down from $242 million in 2008. The company eked out a small profit of $1.7 million last year compared with a net loss of $74.1 million in 2008.

On June 15, the Vishay board formally approved the spinoff of Vishay Precision Group. Shareholders would get 1 share of Vishay Precision for each 14 shares of Vishay common stock held.

The distribution date for the Vishay Precision shares is July 6. But some limited trading could start prior to June 25, the record date for the distribution of the shares, which will be listed on the New York Stock Exchange and trade under the symbol “VPG.”

Vishay Precision already has a small office for its corporate headquarters at 3 Great Valley Parkway in Malvern, about 2 miles from Vishay headquarters at 63 Lancaster Ave.

But that’s really the only footprint Vishay Precision will have in the region because 88 percent of its 1,900 employees work in locations outside the United States in Israel, India, Sweden, the United Kingdom, China, Taiwan and Japan. Its largest domestic factory is in Wendell, N.C.

Only 18 people work at the Malvern headquarters, said William M. Clancy, chief financial officer of Vishay Precision.

Felix Zandman isn’t really saying good-bye to his original business. As a huge shareholder of Vishay, he’ll have a big stake in Vishay Precision, where he’ll also control about 45 percent of the voting power.

An information statement sent to stockholders outlines a number of family ties that will keep the Zandman connection strong in the new spin-off company.

Vishay Precision CEO Ziv Shoshani, 43, is a nephew of Felix Zandman. Shoshani has managed the businesses over the last several years.

Marc Zandman, 48, will be the non-executive chairman of Vishay Precision. He is the son of Felix Zandman.

Dubi Zandman, 58 and vice president responsible for the systems division operations, is a cousin of Felix Zandman.

Finally, Steven Klausner, 52 and vice president and treasurer, is the brother-in-law of Marc Zandman and son-in-law of Felix Zandman.

Inquirer Columnist
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About this blog
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at marmstrong@phillynews.com.

Mike Armstrong Inquirer Columnist
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