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Stocks B / Bacou USA, Inc.


Subject:  Re: Too Low! Date:  3/25/1999  4:10 PM
Author:  Pedo Number:  10 of 11

Bacou is one of 3 or 4 big names in industrial safety. They tend to buy companies that are not fixer-uppers, rather companies that are well established in their markets, ie. Howard Leight, Biosystems, Survivair. As they buy more companies in the safety market, their name becomes that much bigger, but at what cost? Although their total debt to equity is not that of your ideally healthy company, the assumed debt is, in my opinion, looking at the industry as a whole, smart debt assuming that the individual companies purchased retain or increase their market shares.
The industrial safety market tends to be static product-wise. There are very few earth-shattering technologies or inventions that change the face of the market. The size of the US market is growing at a pace that makes any gain in market share a near equal loss for the competition. The slowness to change in the industry puts Bacou in a strong position until competition wakes up to strategies that will increase market share, namely aggressive push and pull marketing strategies, managerial flexibility, decentralized and fast decision making processes, just to name a few. In the absence of these strategies, strength of name alone would keep Bacou at or near the top. In my opinion, 13/share is very undervalued.
As I have expressed before, management in Bacou is far from satisfactory. However, strength of name and core products will keep Bacou at the top providing someone else does not decide to make a real go at winning market share. Fortunately for those at the top, the whole market is plagued with owners and top managers too conservative to take action that would make them stand out. Companies making millions routinely shy away from $2,000 publicity stunts or from ads that break the market mold. It was, in part, such actions that allowed a pre-Bacou Howard Leight Industrie