Wickes Makes a ‘Friendly’ $1.62-Billion Bid for Lear, Agrees to Buy Rival’s Stake
Takeover target Lear Siegler Inc. attracted yet another suitor Monday as acquisition-hungry Wickes Cos. extended its latest buying spree with a friendly $1.62-billion offer for the Santa Monica aerospace and manufacturing conglomerate.
Lear Siegler’s board of directors met Monday afternoon to discuss the proposal but announced no action. Wickes, whose representatives met informally with Lear Siegler officials last week, has asked for a response by 6 p.m. today.
It was the second proposed acquisition by Wickes in three days. On Saturday, the company announced plans to buy for $1.16 billion the New York-based textile firm of Collins & Aikman.
Wickes, a retailing and manufacturing company also based in Santa Monica, demonstrated the seriousness of its minimum $91-a-share, all-cash proposal by agreeing to buy the 9.8% stake in Lear Siegler held by a rival suitor, AFG Partners, “to eliminate a potential hostile bidder for the company.”
Wall Street analysts called the Wickes offer a good deal for Lear Siegler shareholders and predicted that the company would be hard pressed to reject it. The analysts noted that the Wickes offer was at least $6 a share higher than the AFG proposal.
Warm Relations Between Companies
“It’s signed, sealed and delivered,” said Howard Rubel, an analyst with Cyrus J. Lawrence in New York. “All that’s left is for the board to approve it.”
The warm relations between the two companies were also shown by Lear Siegler’s willingness to meet with Wickes officials last week. Analysts and others said that Sanford C. Sigoloff, Wickes’ chairman and chief executive, met with Lear Siegler executives late last week to discuss the proposed takeover.
Despite receiving a minimum $85-per-share takeover offer from AFG Partners nearly 10 days ago, Lear Siegler officials have yet to meet with the partnership.
Still, the Wickes offer caught the analysts by surprise, and several wondered how the two companies, whose sales would reach a combined total of about $6.4 billion, would operate together. Sigoloff said many of Lear Siegler’s businesses are a “good fit with Wickes’ existing manufacturing and automotive businesses.”
Since emerging from bankruptcy in 1984, Wickes has concentrated its efforts in making and selling building materials, home furnishings, women’s apparel and hosiery, and manufacturing and automotive products. Lear, known primarily for its sophisticated aerospace operations, also makes auto seats and glass, Smith & Wesson handguns and pleasure boats.
Frank Rolfes, a securities analyst with Dain, Bosworth Inc. of Minneapolis, said Wickes’ long-term master plan calls for it to stick to the home furnishing and auto parts operations. Lear’s Safelite glass operation could fit well with Wickes’ retail business, he said, and if the defense units can generate enough cash to cover the debt used to buy them, Wickes could conceiveably hold onto them as well. Certain to be divested, however, is the Piper Aircraft unit, Rolfes said.
According to insiders, the Wickes offer was orchestrated by Sigoloff, who took his proposition directly to Lear Siegler officials last week and personally arranged the stock purchase from AFG Partners.
Joel Reed, a principal of AFG Partners, said Sigoloff called R. D. Hubbard, another principal of AFG Partners, last Wednesday morning with an offer to buy the partnership’s 9.8% stake in Lear Siegler.
Reed said that Hubbard met with Wickes officials within hours and that a formal agreement was signed Sunday morning. The deal calls for Wickes to pay a minimum of $91 a share, or $160 million, for the partnership’s 1.759 million shares of Lear Siegler common stock. The partnership would receive a higher price if Wickes pays more for other shares in the company or if Wickes later sells the partnership’s shares at a profit.
If Wickes elects not to buy the partnership’s shares, it must pay the partnership a $5-million cancellation fee.
If the deal goes through, the partnership, which began buying Lear Siegler shares in September and paid an average of $69.50 per share, stands to record gross profits of at least $37.8 million. The partnership is composed of Wagner & Brown, a Midland, Tex., oil and gas company, and AFG Industries, an Irvine glass maker.
Reed said the deal also gives AFG Industries the right to match any offer made for Lear Siegler’s Safelite auto glass operations should Wickes decide to sell it in the future. Hubbard, AFG Industries’ founder and chairman, said earlier that he would have merged the Safelite operations into his own company if the partnership bought Lear Siegler.
Although the partnership had earlier insisted that its interests were strictly to acquire and operate Lear Siegler, Reed said the investor group was unable to compete with Wickes’ offer and did not want to enter a bidding war with a company armed with a hefty accumulation of tax losses that can be used to write off future tax obligations.
“They are willing to pay more for the company than we are,” Reed said.
WICKES AT A GLANCE Wickes, based in Santa Monica, is a building materials and home furnishings retailer. It also makes and sells apparel, hosiery, industrial and automotive products. The company completed a 2 1/2-year bankruptcy reorganization Jan. 26, 1985.
Year ended Jan. 31 (in millions) 1986 1985 1984 Sales $2,086 $3,031 $2,875 Operating income 218 80 62
Assets $1.79 billion
Employees 28,000
Shares outstanding 237 million
12-month price range $4.00-$7.00
Mon. close (AMEX) $4.75, up 25 cents
