AFG Partners Withdraws Bid for Lear
AFG Partners withdrew its $85-a-share offer to buy the Lear Siegler conglomerate Monday but said it remains interested in acquiring the company.
The investment group said it withdrew the $1.5-billion acquisition proposal “in the light of uncertainties” caused by Treasury Secretary James A. Baker III’s comments in a letter he wrote last week about provisions of the new tax law to take effect Jan. 1 affecting corporate takeovers.
However, AFG Partners said it is still interested in buying all or part of Lear Siegler, a Santa Monica company with interests in aerospace, glass and automotive equipment.
A spokesman for Lear Siegler, which has been resisting AFG Partner’s overtures, said the company had no comment to make on AFG’s announcement. The spokesman, Jack E. Cressman, said Lear Siegler will continue to evaluate its previously announced restructuring options, which include a recapitalization, the sale of businesses or a merger.
AFG Partners is composed of Irvine glass manufacturer AFG Industries and Wagner & Brown, an oil and gas partnership based in Midland, Tex. AFG Partners renewed its bid for Lear Siegler last Wednesday, one day after the proposed $1.7-billion merger between Lear Siegler and Wickes Cos. collapsed because of Wickes’ inability to obtain financing. AFG Partners has previously disclosed that it owns 4.7% of Lear Siegler’s shares.
Lear Siegler’s stock price continued to decline Monday, closing at $76.50 a share, down 75 cents, in New York Stock Exchange trading. Lear Siegler’s share price has fallen $6 a share since its $93-a-share merger deal with Wickes unraveled.
A spokesman for AFG Partners said uncertainties about taxation were raised in a letter sent by Baker last Wednesday to Sen. Robert J. Dole (R-Kan.) and Sen. Lloyd Bentsen (D-Tex.). The letter raised questions about the tax liability on financial gains realized on the sale of businesses following a merger and indicated that tax treatment may be less favorable after Jan. 1 than they are now.
AFG Partners previously said it would sell about 40% of Lear Siegler’s operations to help finance the acquisition. A higher tax liability on the proceeds of those sales would have the effect of making a Lear Siegler takeover more expensive for AFG Partners.
Thomas O. Lloyd-Butler, an analyst who follows Lear Siegler for the Montgomery Securities investment firm in San Francisco, predicted that AFG Partners will “come in with a cheaper offer, perhaps in the $80 range.”
He said he thought the drop in price of Lear Siegler stock was the real reason for AFG Partners’ withdrawal of its acquisition offer but that Baker’s tax-related comments provided the investment group with a reasonable rationale for the move.
