Arrow International Inc. said yesterday that it was exploring strategic alternatives, including selling the company, which led a 25-year director to resign and accuse the board of pursuing the possible sale "in a clandestine manner."
The Reading maker of disposable catheters and heart devices said it was considering options to enhance shareholder value. But that decision pitted the trustee for one large shareholder, the Robert L. McNeil Trust, against other Arrow directors.
Director Richard T. Niner, who resigned in protest because he "forcefully opposed" a sale strategy, said the company "is in the midst of a turnaround and value-building program."
However, Arrow's lead director countered that Niner had been acting more in the interest of one of Arrow's big shareholders than on behalf of all shareholders.
Arrow shares shot up 18.2 percent, or $5.98, to an all-time high of $38.82 on the Nasdaq after disclosure of the possibility of a sale.
In his resignation letter, filed yesterday with the Securities and Exchange Commission, Niner accused the board of twice postponing the annual shareholders meeting, now set for July 17. And he said Arrow ignored management's views on the advisability of selling the company.
"For the last several months, the board, in fits and starts and in a clandestine manner, led by its four founders, has been pursuing a sale strategy for the company," Niner, of Jackson, Wyo., wrote. "This strategy, I believe, is being pursued at the wrong time, for the wrong reasons, and in the wrong way."
Niner said in the letter that Arrow's board pursued the sale process only after the Robert L. McNeil Jr. 1983 Trust notified the board last August that it intended to propose a new corporate bylaw placing age limits on directors, and to nominate three board candidates.
"Certain founding members of the board do not wish to face the prospects of defeat in a fair and open election contest," Niner's letter said.
The company, which reported net sales of $482 million for its most recent fiscal year, announced yesterday that it had formed a committee to consider options, which could also include acquisitions or stock buybacks. Arrow said there could be no assurances that the board would pursue any alternatives. The company said it hired Lazard Freres & Co. L.L.C. as an adviser.
Lead board member R. James Macaleer said in a letter to Niner and also filed with the SEC that Niner was aligned more with "interests of the McNeil Trust" - of which he is a trustee - than with the best interests of the majority of Arrow shareholders.
"We understand your concern," Macaleer wrote. "The trust and your close friend, Mr. McNeil, who is 91, may have significant tax liabilities upon a sale of the company. Delaying a sale could provide the trust a solution to that problem."
"While your refusal to consider any strategic alternatives at this time may be in the best interests of the trust, not considering all alternatives is not in the best interests of the other shareholders," the letter said.
Macaleer told Niner: "When the board later began to question the company's performance, marked by missed earnings again and again, you did not appear to be concerned.
"We regret that the apparent pursuit of the trust's interests at the expense of the other shareholders has caused you to resign from the board, but we are proud of the company and the successful investment it has been for you and Mr. McNeil."
McNeil is the retired chairman of McNeil Laboratories, which developed children's Tylenol, and which is now owned by Johnson & Johnson.
Niner is a general partner of Wind River Partners L.L.C., of Jackson, Wyo.