Group With Ties to Pickens Buys Into Lear Siegler
Lear Siegler said Wednesday that an Irvine-based glass company and a Texas oil concern with ties to corporate raider T. Boone Pickens Jr. have jointly acquired more than 5% of its stock and are seeking a meeting with its management. Analysts said it could be the initial move in a hostile takeover bid.
Santa Monica-based Lear Siegler, a diversified aerospace and automotive-products firm that is seeking to restructure in an effort to boost its stock price, said it was approached Tuesday by a partnership made up of AFG Industries, a fast-growing manufacturer of glass products, and Wagner & Brown, a private concern based in Midland, Tex., that has participated in hostile takeover bids for Unocal, Phillips Petroleum and other energy companies.
Neither of the companies involved would comment on their intentions, but analysts speculated that AFG and Wagner & Brown might launch a takeover bid, seek to buy certain Lear Siegler assets, or attempt to profit by selling their stock back to Lear Siegler at a premium--a procedure known as “greenmail.” Lear Siegler’s next board meeting is scheduled for Wednesday, the day of its annual meeting.
The stock buy, announced less than a week after Lear Siegler said it had retained the investment banking firm of Drexel Burnham Lambert to recommend restructuring moves, is likely to force Lear Siegler to accelerate that restructuring or take other defensive steps, analysts said.
Arbitrageurs--investors who seek quick profits by speculating in the stocks of companies that are takeover targets--now own much of Lear Siegler’s stock, making it more difficult for the company to remain independent, analysts said. Those arbitrageurs and other investors have bid up Lear Siegler stock nearly 50% since early October amid speculation that it would be a takeover target or would restructure itself to boost its stock price.
Possible defensive steps that Lear Siegler might take include selling some or all of its assets, buying back some or all of its stock, or seeking a friendly “white knight” suitor, analysts suggested. The firm could also pay greenmail.
Change Predicted
“There definitely will be a change in this company,” said Katherine M. Stults, an analyst with Dean Witter Reynolds. “It’s too late to do nothing. They’ve got to do something.”
“This puts Lear Siegler’s management in a real tough spot,” said Howard A. Rubel, an analyst with Cyrus J. Lawrence Inc. “I’m sure investment bankers are knocking on doors right now” seeking white knights or possible buyers of any or all Lear Siegler assets, he said.
He also speculated that Lear Siegler could fend off AFG or Wagner & Brown by selling them certain subsidiaries. AFG, for example, might want Lear Siegler’s automotive-glass business, which Randall D. Hubbard, AFG’s chairman and chief executive, headed before he formed AFG eight years ago.
AFG officials refused to make any immediate comment but said they would issue a press release today or Friday. Wagner & Brown executives were not available for comment, and a Lear Siegler spokesman refused to elaborate on the company’s brief announcement.
News of the potential takeover threat lifted Lear Siegler’s common stock by 50 cents a share to close at $82.50 in New York Stock Exchange trading Wednesday. With 17.8 million shares outstanding, that would place the company’s market value at about $1.47 billion.
Lear Siegler’s stock had been trading at about $56 a share early this month, when speculation mounted that it was ripe for a takeover or restructuring effort. When the company announced last Thursday that it had enlisted Drexel Burnham Lambert to recommend ways to “optimize shareholder values,” it said it knew of no takeover threat.
Sold Several Divisions
Lear Siegler, suffering from weak earnings due partly to its money-losing Piper Aircraft unit, has already done some restructuring. In the past year, it has sold divisions involved in heating and air conditioning, machine tools, cutting tools, computer terminals, pre-engineered buildings and traffic-control devices. It has also closed three of Piper’s four aircraft plants and has dropped some Piper products.
Nonetheless, Lear Siegler’s earnings fell 45% in its fiscal year ended June 30 to $55.5 million from $100.7 million. However, profit in its first quarter ended Sept. 30 jumped 42% to $16.5 million from $11.7 million.
Wagner & Brown, controlled by Cyril Wagner Jr. and Jack E. Brown, has joined with Texas oilman Pickens in bids for Gulf, Phillips Petroleum and Unocal, sharing multimillion-dollar profits by selling Gulf and Phillips stock.
Wagner & Brown also bid, with Freeport McMoRan, for MidCon, a pipeline company, pocketing a reported $40-million-plus profit. It went after Panhandle Eastern earlier this year in a $2.25-billion bid that was rejected.
AFG Industries, meanwhile, also has made money from buying and selling stocks. It recorded a $1.5-million after-tax profit in this year’s second quarter from the sale of stock in MeraBank, an Arizona savings bank.
AFG has grown quickly to become the nation’s fourth-largest glass maker through acquiring smaller companies and developing new products and technology. LEAR SIEGLER AT A GLANCE Lear Siegler Inc., founded in 1954, is a diversified company organized in three main business segments: aerospace/technology, automotive and commercial/industrial. Its products include flight control and navigation systems; Piper aircraft; automobile components such as seating, air suspension systems and windshields; materials handling systems; Smith & Wesson handguns, and O’Day and Cal sailboats. In millions
1st qtr. ended Fiscal year ended Sept. 30, 1986 June 30 1986 1985 1984 Sales $597.8 $2,464.1 $2,370.7 $1,941.6 Net income 16.5 55.5 100.7 85.1
Assets (as of June 30, 1986) $1.556 billion Employees 29,091 Common shares outstanding 17.78 million 12-mo. price range $46.25 - $82.50 Wednesday’s close $82.50 SALES BY SEGMENT Aerospace/Technology 33.8% Automotive 33.2% Commercial/Industrial 33.0%
OPERATING INCOME BY SEGMENT Aerospace/Technology 10.0% Automotive 48.8% Commercial/Industrial 41.2%
