Otto Eckstein, Warburg Professor of Economics and president of Data Resources Inc. (DRI), a prominent economic forecasting firm, announced this weekend that McGraw-Hill Inc. had agreed to buy the company for $103 million.
McGraw-Hill said they would purchase 45 per cent of DRI stock from Eckstein and other major shareholders at $50 a share, and agreed to offer the same price to stockholders for the rest of the shares during the rest of this month.
DRI closed at $33 a share on the New York Stock Exchange last Thursday, up from $18 a share in March.
Eckstein and his family will reportedly make more than $100 million from the sale. DRI earned $3.1 million in profit last year on sales of $31.5 million.
"I thought McGraw Hill was a good place to lodge DRI because we cannot fully capitalize on what we develop and they can," Eckstein said yesterday. "We can do more with our technology within McGraw-Hill than alone," Eckstein, head professor in Economics 10, "Principles of Economics," said.
Eckstein said McGraw-Hill's style of management would let DRI maintain its independence and develop. "McGraw-Hill, for instance, owns Business Week but they don't tell them what to print--and they won't tell DRI what to forecast about the economy," Eckstein said yesterday.
Eckstein has a contract to stay on as head of the company for three years.
He added that despite the size of its customers, DRI was lucky to get as far as it had considering the competition if faced. "We still own the market, but we are a small company of 600 employees up against the competition of enormous companies like Control Data Corporation," Eckstein said yesterday.
Eckstein added that the recent departure of seven senior executives dramatized the problems of being a small company. Their departure did not cause the sale, but it was a factor, Eckstein said. The executives left to start their own competing company, he added.
"To get a phone call at 2 in the morning in Japan to say that five of your senior employees have quit causes some soul searching. It made us realize that we needed a better pension plan and a more equitable pay structure for our employees," Eckstein said. The ordinary DRI employee will benefit from the sale, he said.