Investor Group Drops $2.2-Billion Offer for Gencorp : Says It Can’t Compete With Company’s Buyback Tender
The investor group that has pursued Gencorp for three weeks dropped its $2.2-billion takeover bid Tuesday, a day after Gencorp announced a bold, defensive restructuring.
General Partners, the investment group composed of AFG Industries of Irvine and Wagner & Brown of Midland, Tex., said it could not “compete economically” with Gencorp’s $130-a-share tender offer for 54% of its shares.
The partnership had officially offered $100 per share for all outstanding Gencorp shares and had volunteered to increase the price to $110 a share. Meanwhile, the partnership stands to make a major profit on its 2.2 million shares of Gencorp.
Gencorp responded by observing that the withdrawal supported its original promise to present shareholders a “financially superior alternative” to the hostile takeover.
Not Ruled Out
On Monday, Gencorp announced a restructuring plan that includes a $1.63-billion stock repurchase and the sale of its soft drink bottling, broadcast and General Tire operations. The plan prompted Standard & Poors to keep the company’s double B-plus subordinated debt on its creditwatch surveillance list with “negative implications.”
Although the partnership withdrew its tender offer, it did not rule out the possibility of making a second run at the company, particularly if Gencorp does not follow through with its stock repurchase and restructuring.
“We really do have an interest in acquiring a basic manufacturing business,” said Joel Reed, chief financial officer of Wagner & Brown and a General Partners spokesman, in an interview recently.
Reed said Wagner & Brown was particularly interested in acquiring Diversitech, Gencorp’s plastics and industrial products manufacturing division. At the same time, AFG Industries, a residential, auto and speciality glass maker, said it wanted Gencorp’s General Tire unit as a retail outlet for its glass products.
As part of the restructuring, Gencorp has said it now intends to sell the General Tire operations, but sources familiar with the takeover battle doubted whether Gencorp would favor a deal with AFG in light of the acrimonious relationship that developed during the past three weeks.
Gencorp had contended that the partners were more interested in generating stock profits from putting the company “into play” on the stock market.
In a law suit against the partnership, Gencorp noted that Wagner & Brown had cleared a pretax profit of $70 million for its part in a run at Gulf Oil led by Texas oilman T. Boone Pickens Jr. and had made $9 million pretax for its unsuccessful attempt to buy Phillips Petroleum, also with Pickens.
Further, Wagner & Brown teamed with AFG last October in an unsuccessful attempt to buy Lear Siegler Inc. That partnership had a pretax profit of $37.6 million
Before launching the attempted takeover of Gencorp, the partnership purchased about 2.2 million Gencorp shares at an average price of about $81.65. The group is eligible to sell back 54% of those shares at $130 each to the company for a gain of nearly 60%.
While the partners have not disputed the possibility of making substantial profits from their Gencorp stake, they have discounted it as a motivation for launching the takeover.
