Wickes Confirms It Made $2-Billion Bid to Acquire Owens-Corning Fiberglas
Wickes Cos., the parent company of Builders Emporium that has been seeking a major acquisition for months, acknowledged Wednesday that it has offered to pay about $2 billion for Owens-Corning Fiberglas, the world’s leading maker of glass fiber products.
Analysts applauded Wickes’ intention to take advantage of the surge in residential housing by bolstering its position in building products, but they indicated that the bid of $70 a share is likely to be rejected by Owens-Corning as inadequate.
Wickes issued its acknowledgment in response to a statement by William W. Boeschenstein, chairman and chief executive of Owens-Corning. Boeschenstein said Wickes’ offer, made by telephone Tuesday by Wickes Chairman Sanford C. Sigoloff, “would be given appropriate consideration” by the company’s board.
Stock Price Rising
However, indicating that Owens-Corning clearly is not immediately receptive to the offer, Boeschenstein said the board would consider “all available alternatives,” including a restructuring.
One observer indicated that Owens-Corning’s conservative management team will probably fight the takeover bid “tooth and nail.”
Speculation that Santa Monica-based Wickes, which has about $1.5 billion in cash on hand, was interested in buying Owens-Corning had been driving up the price of the Toledo, Ohio, company’s shares for a week. However, both companies had previously refused to comment.
In trading Wednesday on the New York Stock Exchange, Owens-Corning was the most active issue, closing up 50 cents a share at $74.50, with nearly 3.8 million shares changing hands. Just before the rumors surfaced a week ago, Owens-Corning shares had been trading at $54.25.
Early Wednesday, the company halted trading of its stock in anticipation of a news release before noon Eastern time. However, the exchange resumed trading after the deadline passed. The statement was finally released in mid-afternoon.
Already Owns Stake
Wickes, which fell 12 1/2 cents to $5.75 on Wednesday on volume of 2.3 million shares, was the most heavily traded issue on the American Stock Exchange.
In his brief statement Wednesday, Sigoloff said “it is my hope” that Owens-Corning’s management will respond favorably to his request for a meeting to discuss the offer. “I believe Wickes’ offer is in the best interests of all of Owens-Corning Fiberglas’ shareholders,” he added.
According to an Owens-Corning spokeswoman, Sigoloff reached Boeschenstein late Tuesday afternoon in New York, where the chairman was conferring with investment bankers because of “concern about activity in the stock.” In the conversation, Boeschenstein said, Sigoloff indicated that Wickes owns 8% to 10% of Owens-Corning’s 29.8 million outstanding shares.
In the statement, Boeschenstein expressed concern that Owens-Corning had not received notification by Wickes about its interest in the company and indicated that “we are puzzled by that, in light of the size of Wickes’ asserted position in our company.”
The spokeswoman noted that under the Hart-Scott-Rodino antitrust act, an investor intending to buy more than $15 million of a company’s shares must file reasons with the government and notify the target company no later than 10 days from the date of purchase. The investor must then wait 30 days before making any further acquisitions.
An exception is made, she said, if an investor intends to acquire more than $15 million of the company solely for investment purposes.
On Acquisition Trail
“However, it would seem clear from Mr. Sigoloff’s phone call that this acquisition is for more than investment purposes,” she added. She estimated the value of an 8% to 10% holding at between $150 million and $200 million. Wickes would not comment Wednesday on any holdings in Owens-Corning.
Wickes, which emerged from bankruptcy proceedings in January, 1985, has been on the acquisition trail ever since. In June, 1985, it agreed to buy Gulf & Western’s consumer products division for $1 billion. Last April, the company made an unsuccessful pass at National Gypsum, another manufacturer of building products.
Two months later, it bought 100 home improvement stores, including the Ole’s chain, from W. R. Grace & Co., then raised $1.4 billion through a debt offering, saying it intended to use the funds for another purchase before year-end.
“Sigoloff is going about it more intelligently this time” than with National Gypsum, said Gregory H. Kieselmann, an analyst with Morgan, Olmstead, Kennedy & Gardner in Los Angeles. “He hadn’t taken a meaningful position in that company and started buying after” the bid was announced.
With about 60% of Owens-Corning stock held by institutions, Kieselmann added, Wickes has a good chance of winning support for a reasonable offer.
Kieselmann noted that Sigoloff is very “price sensitive” and doesn’t like to pay much over book value for companies. “He paid about 1.1-times book for the Gulf & Western unit, and he backed off from National Gypsum when the bidding got outrageous,” he said.
Analysts said Owens-Corning would be fully valued at somewhere between $70 and $75 per share, but Kieselmann noted that observers are speculating that the price could go as high as $85, based on the company’s good growth record.
Wickes, primarily a lumber and building materials company, also makes furniture and apparel. Among its brands are Catalina and Cole of California swimwear and No Nonsense panty hose.
Owens-Corning Fiberglas was formed in 1938 by a joint venture of Owens-Illinois and Corning Glass Works. In 1952, Owens-Corning converted to public ownership and now is independent of its founders.
Many of its products are marketed under the trademark Fiberglas. The company’s commercials for insulating materials feature the Pink Panther cartoon character. It also is a leading producer of polyester resins and high-performance composite materials for use in construction, autos and boats.
Last year, the company bought the aerospace and strategic materials division of Armco for about $415 million. Kieselmann views that division as one that Sigoloff might sell if the acquisition goes through. “He wouldn’t be selling titanium through Ole’s,” he said.
According to a Standard & Poor’s report dated April 30, Owens-Corning is a defendant in nearly 22,000 lawsuits claiming health damage from the use of asbestos products made by the company between 1958 and 1972. The company has indicated that it does not believe that the lawsuits will materially affect earnings.
In fact, a spokeswoman said, the company in January, 1985, stopped taking charges against income relating to those liability claims, contending that its insurance coverage was adequate.
Earned $131 Million in 1985
In 1985, Owens-Corning earned $131 million, or $4.42 a share, on sales of $3.3 billion, up from $114 million, or $3.87 per share, on sales of $3.02 billion the year before.
Analysts expect the company’s earnings per share to rise to $5 a share this year and to $5.60 in 1987.
For its fiscal year ended Jan. 25, Wickes had net income of $76.1 million, or 47 cents per share, on sales of $2.81 billion, including $35.5 million in gains from tax-loss carryforwards, early retirement of some debt and termination of some pension plans.
In its previous fiscal year, Wickes had a profit of $296.5 million, or $20.30 per share, on sales of $1.65 billion. The results included a $263.4-million gain related to completion of the company’s Chapter 11 reorganization and $16.2 million in tax-loss carryforwards.
