Three weeks after saying it would make a major acquisition, Wickes said Tuesday that it will offer to buy all of the stock of National Gypsum at $54 a share cash, or a total of $1.23 billion.
Santa Monica-based Wickes, best known as a furniture and building products retailer that emerged from bankruptcy in January, 1985, said it intends to make a tender offer “as promptly as possible.” A company spokesman declined to say exactly when the offer will be launched. He also declined to say whether Wickes has already bought any Gypsum shares on the open market.
National Gypsum, which has headquarters in Dallas, is a major manufacturer of building products such as wallboard and tile. It had 1985 sales of $1.3 billion and a profit of $87.6 million. Wickes’ sales in fiscal 1985 were $2.8 billion with net income of $76.1 million.
The offer from Wickes came just two days before National Gypsum shareholders were scheduled to vote at a special meeting in Dallas on whether to approve a leveraged buy-out offer from a management group headed by National Gypsum Chairman and Chief Executive John P. Hayes. Last January, National Gypsum’s directors had approved management’s bid, which was believed to be the fifth-largest leveraged buy-out ever. In such a deal, investors borrow against a company’s assets to buy all of its shares.
Terms of the management buy-out call for National Gypsum shareholders to receive $41 a share cash and $17 face amount of debentures for each common share that they own. The 18-year debentures pay no interest for the first five years and thereafter bear interest at a 15.5% annual rate.
The offer has a face value of $1.32 billion, but industry analysts put its actual value--after discounting the debentures to their estimated current market price--at about $1.1 billion.
“It’s clearly a better price,” Les Werkstell, an analyst at First Boston Corp. who follows National Gypsum, said of the Wickes offer. “The (leveraged buy-out) offer is deemed to be worth about $50 a share--$41 a share and debentures on a discount basis worth about in the $8- to $9-a-share range. On the surface, the Wickes offer would appear more attractive given that it is all cash and $4 higher.”
Allan C. Cecil, a spokesman for National Gypsum, said: “We have not received any further information than what was on the wire services. At which time we receive a proposal, we will evaluate it.” Wickes’ spokesman declined to say whether the offer has been delivered to National Gypsum headquarters.
Cecil declined to speculate on what National Gypsum may do if the offer is received before the special shareholders meeting, which is scheduled for 10 a.m. CST Thursday at the company’s headquarters.
Wickes announced its offer after the stock market had closed Tuesday, but speculation that a bid would be made drove up National Gypsum’s stock on the New York Stock Exchange. It closed at $55 a share, up $5.50 from Monday, and was the Big Board’s third most active stock, with 1.9 million shares traded.
Wickes closed on the American Stock Exchange at $6.75 a share, up $1. It was the Amex volume leader, with 4.04 million shares changing hands.
Sanford C. Sigoloff, Wickes’ chairman and chief executive, said in a statement that directors of National Gypsum, having “already decided that it is in the best interests of National Gypsum’s shareholders that National Gypsum be sold,” are under a fiduciary duty to “to consider and accept Wickes’ offer.”
Investment Banker Confident
He also offered to meet with National Gypsum’s management and directors “immediately at a location and time convenient to and chosen by National Gypsum.”
Wickes said its investment banking firm, Drexel Burnham Lambert, said it is “highly confident” that it it can raise financing for the offer. Drexel is the sole underwriter for Wickes’ new offering of $600 million in senior subordinated debentures, which were registered with the Securities and Exchange Commission last week.
The company had said it would use the $600 million together with $300 million in proceeds from the previously announced sale of seven subsidiaries to finance a major acquisition. Analysts say Wickes also has about $300 million in cash and unused bank credit.
Sigoloff has moved quickly since reorganizing Wickes in less than three years under the protection of Chapter 11 of the U.S. Bankruptcy Code. Last June--four months after emerging from reorganization--Wickes purchased the consumer and industrial products businesses of Gulf & Western Industries for $1 billion cash.
Last month, the company disclosed plans to sell four units, which effectively puts it out of the general retailing business. Wickes said it will concentrate instead on three business segments: lumber and home furnishing, manufacturing and automotive parts distribution and apparel and hosiery.
In an interview last month, Sigoloff did not rule out making an unfriendly offer for another company, saying that “it depends on how determined we are.”