Swedlow Quits Merger Deal; OKs Offer by British Firm

Swedlow Inc., a Garden Grove glass and plastics maker, called an end Monday to its yearlong effort to merge with PPG Industries Inc. and announced that it has now agreed to be acquired by a British conglomerate in a deal valued at $42.3 million, the identical value of the failed PPG deal.

The new agreement, expected to be signed today, would add Swedlow to the list of about three dozen subsidiaries worldwide of Pilkington Brothers PLC, a Merseyside, England, glass manufacturer that claims to have 18% of the world glass market.

Swedlow decided to abort its agreement with the Pittsburgh-based PPG because of past and expected future delays caused by a Federal Trade Commission court action designed to block the purchase on antitrust grounds, said Charles J. Deischter, Swedlow’s president.

The FTC claimed that the merger with the world’s largest glassmaker would lessen competition in the making of aircraft windshields, Swedlow’s specialty. Administrative hearings were scheduled to continue this week, said Edward J. Slack, PPG’s president.

Swedlow was concerned about the delay and was considering alternatives, Slack said, “but I had no idea (acquisition) discussions were going on with other parties.”

Pilkington, whose products Swedlow has used for the last 10 years, approached Swedlow about six weeks ago with an offer nearly identical to PPG’s, Deischter said.

Disappointed Deal Was Called Off

Slack said he was “disappointed” that the PPG deal had been called off. He could not say what action, if any, PPG might take.

Swedlow’s chairman, David A. Swedlow, is 75 and “wants to get his financial situation in order,” Deischter said. Swedlow and his former wife own 49% of the company and both want to sell, Deischter said. Directors and officers own 2% to 3% of the company and also will sell, he said.

Under the agreement, Pilkington will get the Swedlows’ proxy to vote in favor of selling the company to Pilkington at $32.60 a share if the sale is completed by the end of the year. That is the same amount offered by PPG.

However, if the sale is completed after Jan. 1, the price will jump to $33.40 a share, a provision that was not in the PPG deal. The same offer will be made to remaining shareholders.

Continue to Operate in Garden Grove

Swedlow and its 770 employees will continue to operate in Garden Grove as a Pilkington subsidiary, said Jack Gold, Swedlow senior vice president and attorney.

Since it went public in 1971, Swedlow’s stock had never traded for more than about $30 a share, and that occurred last year after the planned acquisition by PPG was announced. It quickly plummeted more than $5 a share when the FTC said in December that it would oppose the sale.

In February, a U.S. District Court judge in Washington allowed PPG to own Swedlow’s stock but required it to operate the company as a separate entity until the antitrust issue was resolved. An appellate court issued an injunction in August preventing PPG from acquiring the stock.

“That’s when we got frustrated,” Gold said.

Founded in 1946 by Swedlow, the company developed a hard, plastic transparency that became popular as canopies for military aircraft. A scratch-proof technology has applications in the automobile and medical fields, analysts have said, and it far exceeds plastics technology at other companies, including PPG and Pilkington.

Military Revenues

Revenues from military contracts account for more than half of Swedlow’s sales, Deischter said, and he does not expect to lose current or future contracts because a foreign company is buying Swedlow. He said he expects, however, that Swedlow will need both FTC and Defense Department approval for the merger.

In its first fiscal quarter ended June 29, the company had a net income of $635,000 on revenues of $14.5 million, an increase over the $354,000 earned in the previous year’s first quarter on revenues of $13.5 million.

For the fiscal year ended March 30, Swedlow reported net income of $1.4 million on revenues of $54.7 million.

Pilkington, a 160-year-old glassmaker, has 37 subsidiaries in 16 countries. In March, it purchased the glass division of Libbey-Owens-Ford Co. in Toledo, Ohio, for a reported $355 million in cash and stock. Pilkington’s annual profits in recent years has been $158 million to $174 million on sales of $1.8 billion to nearly $2 billion.

Swedlow Inc. 5-Year Financial History. (in millions)

1986 1985 1984 1983 1982 Net Sales $54.7 $46.3 $39.4 $39.8 $39.8 Net Income 1.4 1.9 1.8 1.2 1.7 Total Assets 35.9 28.9 23.7 20.9 20.4

Swedlow stock history

Year High Low 1977 $4.25 $2.875 1978 $6.25 $3.50 1979 $5.375 $3.875 1980 $8.75 $3.50 1981 $11.00 $6.75 1982 $12.50 $7.00 1983 $14.25 $7.50 1984 $13.75 $9.25 1985 $30.00 $11.75 1986* $29.50 $19.00

Monday’s Closing Price: $25.00 *As of September, 1986. Source: Standard & Poor’s Corp.