YSI looking for a strategic partner
- Published: March 31, 2011
YSI Incorporated, Yellow Springs’ largest employer, has announced its intention to seek a strategic partner, according to a March 18 press release. The action could mean major changes for the company, including leaving the community, or local job growth.
There are two reasons for seeking a strategic partner, according to CEO Rick Omlor at an update for Village leaders on Monday: the need for liquidity for several large YSI stockholders, and the need for more resources to enhance the company’s growth.
“We have a lot of new plans,” Omlor said. “We also need growth capital.”
While talks with potential partners will begin soon, no decisions have been made at this time, Omlor said, stating that the company hopes to complete the process by the end of summer. The 63-year-old company has been independent since its inception.
Asked to describe the meaning of YSI seeking a strategic partner and if and how the action differs from being sold, Omlor in a later e-mail wrote, “Searching for a strategic partner means that in this change of control transaction, we find a partner who values the employees, the culture, the legacy and the communities in which we reside. We believe this is a big difference from just putting the company up for sale. We are approaching this proactively, searching for a partner who will be a great strategic fit for YSI and consider the needs of all the stakeholders.”
A leading developer and manufacturer of water monitoring and testing products, YSI has 370 empoyees in 22 locations around the world, including about 160 in Yellow Springs.
The company is pursuing its new direction from a position of strength, Omlor said at the Monday meeting.
“YSI is in great shape, and 2010 was a record year,” he said. “We will have our choice of a really good partner.”
According to the press release, last year YSI for the first time reached $100 million in revenues.
In response to concerns raised about the potential for YSI to leave Yellow Springs, Omlor stated that the company “is deeply commited to finding a partner that values the legacy of the company and appreciates our position in the community…”
“It’s highly unlikely that YSI will leave Yellow Springs,” he said. “I can’t imagine someone coming and making massive changes to something that’s working well.”
However, Omlor stated that it would not be possible to include a commitment to stay in Yellow Springs as part of the partnership agreement.
The need to find a strategic partner was sparked by “a number of shareholders in the last year who…said they would like liquidity” from their stock holdings, Omlor said. Company leaders then “looked at the options and decided that a strategic partnership is best,” he said. Current company leaders brought in the company’s founders, who agreed with the current management’s decision.
The decision was a difficult one, Omlor said, “but it’s the right thing to do.”
Omlor also emphasized that the new direction could mean new growth in the community, and thus new jobs.
Omlor declined to identify the shareholders seeking liquidity, or the company’s largest shareholders. He emphasized YSI’s shareholders’ diversity, stating that the group includes “nonprofits, colleges, universities, estates and retired employees.” He emphasized that pressure for liquidity came from several large shareholders, not just one, and declined to speculate on the reasons for wanting liquidity. Outside shareholders hold about 60 percent of YSI stock, while current employees own the balance, through the company’s Employee Stock Ownership Program, or ESOP.
In response to a question, Omlor stated that Antioch College and Antioch University are among the largest outside shareholders. The college owns “a substantial chunk” of YSI stock, according to YSI founder Hardy Trolander.
Antioch College owns about 44,290 shares of YSI stock, which it has appraised as worth $198.40 per share, according to Antioch Pro Tempore Board Chair Lee Morgan in an interview on Monday. However, the true value of stock is what interested buyers will pay, according to Trolander. The college’s YSI holdings, which are its largest investment holdings, are a part of the college’s $25 million endowment, according to Morgan.
The college would prefer liquidity in its stock holdings, although there is nothing new in that position, according to Morgan, who said, “Whenever a philanthropy gets closely held stock, it looks for liquidity.”
Morgan also stated that he “has had conversations over the years” with YSI regarding the college’s desire for liquidity, but only in informal and casual ways. However, there has been no formal request to YSI for stock liquidity, nor any decision by the college’s pro tem board to make a request, Morgan said.
The college’s desire for YSI stock liquidity is not tied to a need for cash, because as part of the college endowment, the use of revenues from the stock is restricted, according to Morgan. Each year the college is allowed to use 5 percent of its endowment for immediate needs, he said.
Rather, he said, the college seeks liquidity for the purposes of diversification of its stock holdings. Being able to diversity stock holdings rather than holding so much stock in one company allows the college to “reduce its risk of exposure to one investment,” he said.
Following the Monday meeting, Village Council member and Chamber of Commerce Director Karen Wintrow said that it’s important for the Village to do “whatever we can do,” to help the company stay in the village, including seeking opportunities from the state and county.
“There are lots of reasons for YSI to stay in Yellow Springs,” Wintrow said, stating that the action “could be an exciting opportunity for growth” in the village.