Wickes’ Bid for Lear Siegler Stalled by Financing Woes : Wall Street Observers Say Turmoil in Takeover Market Created by Insider Trading Scandal May Be Hurting Firm
In what some speculated may be fallout from turmoil in the takeover market, Wickes Cos. said late Tuesday that it has been unable to arrange satisfactory bank financing for its $1.7-billion purchase of Lear Siegler and “is not optimistic” about getting it.
Wall Street observers speculated that the apparent crumbling of the deal is directly related to the insider trading investigations affecting professional speculator Ivan F. Boesky and Drexel Burnham Lambert, Wickes’ traditional investment banking firm and a champion of raising money through high-yield, high-risk “junk bonds.”
Santa Monica-based Wickes, which announced its friendly deal with aerospace conglomerate Lear Siegler just a week ago, noted in a release that Wickes’ tender offer and merger agreement “are both conditioned upon Wickes’ ability to finance the acquisition on terms and conditions reasonably satisfactory to Wickes.”
The statement said Wickes had delivered a letter to Lear Siegler saying that “Wickes is continuing its efforts to obtain satisfactory financing, but it is not optimistic that it will succeed in these efforts.”
One Wall Street executive close to Drexel observed that the investment firm’s role in obtaining financing may create trouble for new merger deals, particularly if a Drexel official involved is caught up in the investigation following the disclosure of Boesky’s involvement in insider trading.
One figure in the Wickes-Lear Siegler transaction is Martin A. Siegel, a Drexel merger specialist who has been subpoenaed as part of the insider investigation. Siegel is representing Lear Siegler, but Drexel has long had ties to Wickes and its chairman, Sanford C. Sigoloff. In June, for example, Wickes raised about $1.4 billion through a debt offering handled by Drexel.
Drexel itself may be withdrawing voluntarily from some deals, the Wall Street executive said, but “deals are going on, and deals are going on with Drexel.”
Since announcing the Lear Siegler deal, Wickes has been negotiating very intensively with Citicorp and Security Pacific to obtain financing but has considered unacceptable the terms and conditions proposed by the banks.
In its statement, Wickes said the Lear Siegler situation does not affect its pending offer for Collins & Aikman, a New York-based textile company for which Wickes plans to pay $1.16 billion in cash.
Despite rampant speculation about a direct correlation between Wickes’ inability to obtain financing and the Drexel investigation, a banking source said that any such suggestion would be “barking up the wrong tree.”
According to banking sources, Citicorp representatives met late in the day with Wickes officials, who then sent a letter about 6 p.m. to Lear Siegler Chairman Norman A. Barkeley at his office, which is in the same industrial park as Wickes’ headquarters. Barkeley could not be reached for comment Tuesday evening.
A Lear Siegler spokesman said only that the company “received the information after business hours and is evaluating it.”
Wickes’ tender offer expires Dec. 11, but the company reportedly must obtain financing commitments three days before that date. If the Wickes deal collapses, a group of investors--AFG Partners--has said it may resume efforts to buy Lear Siegler. AFG pulled out of the bidding for Lear Siegler when Wickes stepped forward.
Frank Rolfes, an analyst with Dain, Bosworth in Minneapolis, noted that all might not be lost for Wickes. “I think there are other people who may be wanting to get into the business that Drexel has had,” he said. “So there’s a possibility that somebody may come up and offer its services to Wickes.”
Times staff writers Nancy Yoshihara, Nancy Rivera Brooks and Carla Lazzareschi contributed to this story.
