TSR Inc. says it plans to pursue a 'strategic acquisition'

Hauppauge-based technology staffing company TSR Inc., which late last month rejected a takeover bid from a major shareholder, said it plans to pursue a "strategic acquisition."

The move, recommended by a special committee of the board of directors, would expand TSR's customer base and boost profitability, the company said in a statement.

“The special committee and its advisers conducted a disciplined and independent strategic alternatives process to ensure the best outcome to maximize value for stockholders. The board believes that pursuing a strategic acquisition is in the best interests of all TSR stockholders,” Christopher Hughes, chairman and president of the company, said in the statement.

On Monday he said TSR would not comment beyond the statement in a Friday news release.

The special committee found that “the strategic acquisition of one or more businesses operating in the same business sector as TSR or a complementary business sector is in the best interests of the company and its stockholders and has recommended that the company begin actively pursuing potential acquisition candidates,” TSR said in the statement.

The statement didn't provide more specifics about what type of businesses would be sought for acquisition, or a timeline for doing so.

The board's special committee retained Uniondale law firm Farrell Fritz PC as its independent legal adviser, according to the statement. The firm referred requests for comment to Christopher Hughes.

The committee also hired Manhattan-based investment banking firm CoView Capital Inc. as its independent financial adviser.

CoView identified companies that are potential candidates for acquisition, and the special committee is authorized to approach those companies and negotiate “acquisition target proposals and agreements,” TSR said.

CoView could not be immediately reached for comment.  

TSR doesn’t have a lot of free cash flow, so an acquisition could be cause for concern, said Anthony Campagna, global director of fundamental research for ISS-EVA, an equity research firm based in Manhattan.

Since about 2010, the company has done a “good job of getting the business from bad to so-so,” including managing its balance sheet and capital investments, he said.

“If they go out and buy [a company] now, and have to use debt to finance [it] and add additional leverage to the balance sheet, it could dry up their free cash flow,” he said.

TSR’s special committee was formed in July to consider strategic options, including a request by founder and former chief executive, Joseph F. Hughes, and his wife, Winifred M. Hughes, to sell the company.  

The couple were disappointed in TSR’s financial results, they wrote in a letter to the board and their son, Christopher Hughes, in June.

In July, they sold their 41.8 percent stake in the company to three institutional buyers, including Manhattan-based investment company Zeff Capital LP, which now owns 22.3 percent of TSR, and QAR Industries Inc., a Mineral Wells, Texas-based maker of broadcast and communications equipment that owns 7 percent.

On Nov. 28, TSR said it had rejected QAR’s bid to acquire the Hauppauge company for $6.25 per share, and called the offer “inadequate.”

TSR’s stock price Monday closed at $5.20, unchanged from Friday. 

By Tory N. Parrish

tory.parrish@newsday.com@ToryParrish1

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.