Japanese buy-out of US ball-bearing company raises eyebrows

Nestled among the quiet, rolling hills of rural southern New Hampshire, the New Hampshire Ball Bearings plant seems anything but a center of controversy. In its 35 years, the company has grown to become the state's ninth-largest employer. It has also gained admiration within the industry as a fiercely competitive Yankee business, successful at staving off competition by foreign companies.

Now, however, some observers are accusing New Hampshire Ball Bearings of selling out to the ''enemy.''

The controversy is over the proposed sale of New Hampshire Ball Bearings to one of its chief Japanese competitors, the Minebea Company. The Japanese have offered $110 million. New Hampshire Ball Bearings president Theodore Kannell says the offer is too good to pass up.

In the meantime, government officials are reviewing the proposed sale to examine if the merger might endanger United States national security or violate antitrust laws.

The reviews by the Pentagon, the US Justice Department, and other government agencies were sparked after plans for the merger were made public last month. Minebea is offering a lucrative $65 a share for all outstanding stock in the company. The stock closed on the American Stock Exchange Tuesday at $49.25.

New Hampshire Ball Bearings had total sales of $59 million last year. The company employs 1,500 workers. Minebea, a conglomerate with total international sales of $600 million, is considered one of Japan's top-four ball-bearing companies. Its annual sales of bearings total some $100 million.

The potential merger has raised concerns in some industry circles that Minebea and New Hampshire Ball Bearings could monopolize a specialized segment of the American ball-bearing market, squeezing out other domestic producers and ultimately controlling prices. Minebea already owns NMB, a California-based ball-bearing company.

Other observers are concerned that the sale may hurt national security by placing some of America's production facilities for miniature ball bearings - installed in missile gyroscopes and almost all other US high-tech weapon systems , aircraft, and equipment - under the control of a foreign business.

Still, others simply don't like the idea of the Japanese or other foreigners owning companies based in the US.

''I don't share their concern, frankly,'' says Mr. Kannell. ''I'm not sure their concerns are valid.''

Kannell says he has a written commitment from Minebea that the Japanese company will retain the New Hampshire company's existing board of directors, plant and location, company name, and overall management team - including Kannell as president. He adds that he has also received assurances that Minebea will invest between $10 million and $50 million in new plant and equipment at the company's existing sites.

''I don't think our employees will see anything different other than a little faster growth,'' Kannell says.

He says the end result will be that New Hampshire Ball Bearings will become a more efficient producer of precision ball bearings. And that, he stresses, should be a boon - rather than a threat - to US national security.

The view from Washington is different. At present there are four US companies - including New Hampshire Ball Bearings - producing precision miniature ball bearings considered critical to US weapon systems. The questions defense officials are investigating are: Will the sale constitute substantive erosion of America's critical industrial base; and does it matter that the company would be owned by a foreign entity, as long as the production facilities remain in the US?

''This is not the kind of operation where you can fold up your tents and move it to some far away location,'' says Kannell.

The president adds that while the end use of the bearings may be strategic, the manufacturing process is not. He says that nothing in the company's manufacturing process is classified by the government or considered secret. He adds that classified work has not been conducted in New Hampshire Ball Bearings facilities for 10 years.

Kannell, who joined the company 27 years ago, says that though there are only four companies now producing miniature ball bearings, many of the other companies in the country which specialize in ball bearings could modify their equipment and began manufacturing the smaller ball bearings as well.

According to James J. Whitsett, president of the Anti-Friction Bearing Manufacturing Association, a key aspect of the antitrust review will depend on how government officials define the ball-bearing market and the role of New Hampshire Ball Bearings in that market. ''The big question will be what constitutes the market which they will be looking at,'' Mr. Whitsett says.

If the officials take a broad view, including the full range of ball bearings from small to large, he says New Hampshire's role will be seen as minimal. (New Hampshire supplies roughly 4 to 6 percent of the ball bearings purchased by the Defense Department.)

But Whitsett adds that if the government takes a narrow view, looking solely at the current producers of miniature ball bearings, New Hampshire's role will be seen as more significant. (Defense Department sales account for roughly 45 percent of New Hampshire's total sales.)

''We are all struggling to understand the workings of these complicated markets,'' says Donald Baker, a Washington lawyer for New Hampshire Ball Bearings.

Mr. Baker predicts that the government review process may continue until the middle of next month. At that point recommendations would be made to the Justice Department to either allow the merger to be completed, permit the merger with certain conditions, or file suit to block the sale.