With Wickes Bid in Doubt, Lear Says It Will Try to Restructure
Lear Siegler said Wednesday that it is “disappointed” by the surprise announcement that its $1.7-billion merger with Wickes Cos. may be dead but added that it has the financial strength to pull off a previously announced “major restructuring program.”
Meanwhile, AFG Partners, which had mounted an earlier takeover bid for Lear Siegler, said it will resume purchasing the Santa Monica company’s stock and may renew its efforts to try to buy the company.
Wickes announced Tuesday night that it has been unable to arrange satisfactory bank financing for the deal and that it is “not optimistic” it will be able to the reach the terms it wants. Wickes continued to negotiate Wednesday with its bankers.
Only last week, Wickes dazzled Wall Street by announcing the Lear Siegler merger just three days after arranging to buy the Collins & Aikman textile firm for $1.16 billion.
Lear Siegler’s stock price Wednesday plunged $10.875 to close at $79 on the New York Stock Exchange. Wickes stock was the most active on the American Stock Exchange for the second consecutive day with nearly 3.3 million shares changing hands. Wickes’ stock price was unchanged at $4.
If the deal with Wickes crumbles, analysts said, Lear Siegler’s days as an independent company probably will be over unless the aerospace and manufacturing conglomerate can hike its stock price through a significant restructuring.
“It has to be a substantial (restructuring) program for the simple reason that you’ve got arbs up to their necks in the stock,” said Sidney Heller, an analyst with the Shearson Lehman Bros. securities firm. Arbs, or risk-arbitrageurs, purchase large blocks of stocks that are rumored or involved in takeovers and make money when the price rises.
“If they don’t make these guys happy (by increasing the stock price through a restructuring), they’re going to end up as the cornerstone of some other company’s acquisition program,” Heller said.
Some analysts speculated that the Lear Siegler deal is unraveling because Wickes has lost the option of going to the “junk bond” market, which is reeling from insider trading investigations affecting arbitrageur Ivan F. Boesky and the Drexel Burnham Lambert investment banking firm. Drexel, which specializes in the high-interest, high-risk junk bonds, was advising Lear Sieger in the transaction but has advised Wickes in previous deals.
“This doesn’t improve (Wickes’) image in the investment community,” said Anthony Pearce-Batten, an analyst with the Legg Mason Wood Walker brokerage firm in Baltimore.
“I don’t understand what’s changed so quickly,” since Wickes obviously was fairly confident of its financing when it announced the takeover, he said. “Maybe a company that thought it could announce two acquisitions in three days didn’t think the second one out very well and bit off too much.”
Lear Siegler had announced plans to restructure but has never revealed any details of the plan, which was being developed by Drexel. A Lear Siegler spokesman said: “We still have a contract with Drexel, but that is as far as I would want to comment.”
Lear Siegler’s options include selling assets and borrowing money to buy back stock. Lear Siegler has already done some restructuring, selling seven divisions and consolidating 12 in the last year.
The spokesman for Lear Siegler declined to say whether the company would welcome a new offer from AFG Partners, which first put the company in the takeover derby.
A rejuvenated takeover offer “is an option that we are going to consider,” said Fred Spar, a spokesman for AFG Partners, which consists of Irvine-based AFG Industries and Wagner & Brown, a Midland, Tex., oil firm.
