AFG Partners Says It Would Sell Off Half of Lear Siegler

The investment group seeking to purchase Lear Siegler Inc. said Sunday that it now owns slightly less than 10% of the Santa Monica conglomerate’s stock and intends to sell off half the company’s business if its $1.5-billion takeover bid is successful.

The partners said they plan to sell Lear Siegler’s aerospace, glass-making and troubled Piper Aircraft units. They would then operate the remaining units, including divisions that manufacture a variety of consumer products, automotive parts and high-tech equipment.

The partners also dismissed any suggestion that they are willing to end their takeover bid if they are paid a premium price for the stock they now own--a maneuver, known as “greenmail,” that is particularly offensive to a target company’s shareholders and to Wall Street speculators who gamble on takeovers.

Will Not Accept Greenmail

“We will not accept greenmail,” said R.D. Hubbard, chairman of AFG Industries, an Irvine glass maker that owns 50% of the partnership.

“We are committed to this transaction,” added Joel Reed, chief financial officer for Wagner & Brown, a Midland, Tex. company that comprises the other half of the partnership. “We have definite ideas about how to run this company.”

Hubbard and Reed also said they would consider launching a hostile takeover if Lear Siegler spurns their acquisition overtures.

Lear Siegler officials declined Sunday to respond to AFG Partners’ comments. Lear Siegler so far has had no direct contact with the investment group, and it has declined any comment on the takeover bid since it was disclosed last week that the partnership owns a substantial number of its shares.

However, analysts said the partners’ latest remarks increase the pressure on Lear Siegler to respond in some fashion. There is speculation on Wall Street that Lear Siegler is looking for another merger partner willing to pay a higher price or is considering the sale of certain operations, including its money-losing Piper Aircraft division, to boost the price of its stock.

Lear Siegler, which will hold its annual shareholders meeting Wednesday, has been meeting with investment bankers from Drexel Burnham Lambert for at least several weeks to develop restructuring moves. The company announced that it was considering a restructuring one week before AFG Partners disclosed its stake in the firm.

Although analysts said they were increasingly doubtful that Lear Siegler can retain its independence, they cautioned that AFG Partners may not be the ultimate victor.

Analysts remain skeptical about the true intentions of AFG Partners, noting that the partnership has neither talked to Lear Siegler officials nor presented a formal merger proposal or tender offer. AFG Partners has communicated with the company via a single-page letter delivered late Thursday in which it sought to negotiate an “agreeable business combination or cash merger” and has met with Drexel Burnham in an effort to set up a meeting with management.

Trading Above Buyout Price

Several analysts also argued that the $85-per-share minimum price offered by the partnership may be $5 to $20 below what they company could get from another suitor. Riding on Wall Street’s apparent expectation that there will be a higher bid for Lear Siegler, the company’s shares ended an active week of trading 75 cents above above the proposed buyout price.

“I would continue to keep a wary eye,” said Howard A. Rubel, analyst with Cyrus J. Lawrence in New York, of the partnership. The investor group “could still be looking for a way out. They can still sell their stock out from under this and profit handsomely.”

However, AFG Partners insists that it intends to complete the transaction. Hubbard and Reed said that, if they succeed in taking over Lear Siegler, there should be little difficulty in finding a buyer for Lear Siegler’s aerospace operations. Analysts concurred, with one suggesting that the units could command a price of about $850 million.

Hubbard said the partners would attempt to find a buyer for Piper Aircraft, the general aviation plane manufacturer. However, he said the unit, which already has been scaled back, would be closed if no buyer could be found.

Under the takeover plan, Lear Siegler’s glass-making operations would be sold to AFG Industries, Hubbard’s company, for an as-yet undetermined price. Hubbard, once president of Lear Siegler’s Safelite glass-making operations, said AFG Industries is prepared to give the partnership $100 million of its preferred stock as a down payment on Safelite.

Hubbard said he would remain with AFG Industries and leave management of Lear Siegler to the current group of divisional presidents. There has been no determination about the future of the company’s senior management, Hubbard said.

Both Considered Takeover

Hubbard and Reed said the two companies became partners several weeks ago after it was learned that both were independently considering a takeover of Lear Siegler. Reed of Wagner & Brown said the two companies were introduced by officials from Bear, Stearns & Co., an investment banking firm that both companies had separately retained.

Analysts said Lear Siegler has been considered a potential takeover candidate since early this year when the company reportedly paid a premium to buy back stock acquired by the Belzberg bothers of Canada.

Further, analysts say the company’s stock, which in early October was trading in the mid-$50 range, was considered a bargain in light of Lear Siegler’s annual revenues of $2.5 billion and profit of $55.5 million for the fiscal year ended June 30. Analysts blamed the low stock price on the company’s decision to keep its money-losing Piper Aircraft operations.