PhillyDeals: Local firm going from military munitions to glow-in-the-dark materials

The U.S. military pullback from Iraq and Afghanistan has government contractors scrambling to find civilian work.

Day & Zimmermann, the $2.2 billion (yearly sales), family-owned Philadelphia engineering company, says it's going into the glow-in-the-dark materials business to keep its Texarkana, Texas, manufacturing plant running as its Army orders for large-caliber explosives drop.

"Military munitions spending is going to be trailing off. We are looking for additional things we can put in the pipeline," D&Z spokeswoman Susan Omrod told me.

Military spending accounts for about a quarter of the company's sales, but with the "drawdown" by the Obama administration, "we are expecting that

spending to be cut," and are looking for "emerging technologies" with civilian applications, Omrod said.

D&Z's latest deal is with Performance Indicator L.L.C., Lowell, Mass. D&Z will use Performance technology to open the only U.S. production line making strontium aluminate, a phosphorus bonding base that glows in the dark, for airport runway paint, casino and pharmaceutical anti-tampering devices, and other industrial and military uses, says Performance spokesman Mike Charley. The joint venture is called US Phosphor L.L.C.

D&Z recently signed a second deal with OxyBand Technologies Inc., San Francisco, to market an oxygen-impregnated bandage it says aids healing.

Change to Win, the labor federation that includes the Service Employees International Union and other big unions, says it is preparing to urge investors in Community Health Systems Inc. to vote against John A. Fry, the newly installed president of Drexel University, and two other directors in the hospital chain's board elections on May 17.

The move by CtW amounts to a counterstroke on behalf of Tenet Healthcare Corp. against Community's unsolicited takeover offer to buy Tenet for $6 a share, or $3 billion, plus debt.

Tenet has said Community's price isn't enough. Community has urged Tenet shareholders to replace its board if Tenet managers keep resisting. Tenet countered with a lawsuit last week accusing Community of "systematic" Medicare fraud, which Community denies.

In this struggle between two national, for-profit hospital networks, why are the unions taking a side? Tenet's hospitals include urban locations with union workforces; Community's hospitals are often suburban and small-town institutions where unions are weak.

Analysts at Susquehanna International Group, Bala Cynwyd, have estimated a deal could enable Community to shave as much as $400 million off Tenet's $9 billion yearly budget by firing headquarters workers and cutting other expenses.

Tenet's facilities include Philadelphia's Hahnemann Hospital, which is staffed by Drexel's medical school. Fry is both a Community board member and Drexel's boss, which gives him one foot in each camp. Community owns hospitals in Chestnut Hill and several Chester County communities.

In a letter to Community audit committee head John A. Clerico dated Friday, CtW executive director William B. Patterson says the Tenet lawsuit echoes accusations his union group made in a letter to Community last year.

Patterson also said Community wasn't offering enough for Tenet, and that it would have to borrow heavily to pay an adequate price. He accuses Community of ducking the issues, and threatens to urge a No vote against Fry, Community chief financial officer W. Larry Cash, and Priority Capital Management L.L.C. boss James S. Ely 3d, who also sits on the board of the Camp Hill, Pa.-based Select Medical Corp. hospital chain, unless Community gives a "substantive response" by Wednesday.

In a letter to Clerico last fall, Community general counsel Rachel A. Seifert cited the unions' close ties to the SEIU and ongoing hospital labor disputes, and said she would decline to reply.

Community declined to comment. A Drexel spokeswoman was unavailable for comment. Hahnemann officials referred queries to Tenet, which had no comment.