Hubbard Looks Beyond Glass to Gas and Oil : AFG Boss, Thwarted by Lear Siegler Last Year, Seeks New Takeover Targets
R.D. Hubbard is on the prowl again.
Undaunted by his much-publicized, unsuccessful attempt to take over Lear Siegler last year and armed with a cash reserve of $200 million, the aggressive Irvine-based glassmaker is looking for new acquisition targets.
And he knows what he wants to complement AFG Industries’ existing lines of residential and specialty glass. High on the list are oil and gas reserves, as a hedge against AFG’s heavy use of energy for glassmaking. He also wants additional manufacturing operations not necessarily related to glass or building supplies.
The reasons for the renewed buying effort are the same that prompted Hubbard to align with oil and gas drillers Wagner & Brown last September to launch a hostile takeover bid for Lear Siegler, the Santa Monica manufacturing conglomerate. Simply put, AFG needs new markets if it is to continue its torrid growth pace, Hubbard said in an interview.
Since being rescued from near-bankruptcy by Hubbard nine years ago, AFG has risen to become the nation’s leading supplier of specialty glass--including that used in patio furniture, shower doors and appliances--and the fourth-largest maker of flat glass, which is used primarily in residential and commercial construction. Sales, which reached a record $452 million last year, have been growing by nearly 50% each year since 1978, and Hubbard is projecting at least two more years of sales increases.
But despite the success, Hubbard said that the billion-dollar glass industry has growth limitations and that AFG will soon need additional operations to maintain its sales pace. Right now, Hubbard said, he has no target in his sights, but that is not because he and his investment bankers aren’t looking.
Hubbard says he receives tips almost daily from investment bankers who know of his cash hoard and itchiness to buy. “Everyone sends us ideas, and the investment bankers would drive you nuts if you let them,” he said.
But, he added, nothing appears either promising or imminent, including his primary interest at Lear Siegler: the Safelite auto glass division.
Although Lear Siegler’s new owner is selling off some manufacturing operations to reduce its debt and make the company profitable, Hubbard said he has been told in “no uncertain terms” that the Safelite division is not going on the block.
Still, Hubbard said, he is not worried about finding a company to buy. He is convinced that the recent flood of leveraged buyouts will produce a bumper crop of companies for sale when the economy hits an inevitable tailspin. “Whether it’s one year, two years or five years, we’ll be adding another line of business to AFG,” he said confidently.
Hubbard almost got his wish last month when he thought he had lined up a deal to acquire a 28% stake in Southdown Inc., a Houston cement maker with oil and gas reserves. But the deal got away when the shareholders decided to sell the block back to the company for $2 a share more than Hubbard had agreed to pay.
“We were used,” Hubbard said in a long drawl, punctuated by a laugh. “And then we were dropped. And it would have been a perfect fit.”
Although he has been rebuffed before, Hubbard usually has something to show for it.
Late last year, there was a $9- million after-tax profit for AFG Industries when it sold its Lear Siegler shares and dropped its hostile takeover attempt.
In other cases, Hubbard has made money for AFG without even trying to buy his investment target.
Early last year, the company earned about $10 million after taxes by selling its 20% stake in Merabank, an Arizona financial institution that Hubbard felt was ripe for a takeover and merger into a larger institution.
The apparent Midas touch works for his personal account as well. Last month, Hubbard said, he made $130,000 from a six-week, 10,000-share investment in Owens-Corning.
“I don’t usually play the market, but every once in a while I get in,” he said. “I never made any money at it until the last two years.”
