Standard Brands Paints to Buy Back 53% of Shares
Standard Brands Paint, a leading do-it-yourself home decorating chain under takeover pressure, announced Tuesday that it intended to buy back more than half of its stock.
The Torrance-based company said it would borrow $190 million and stop paying its quarterly dividend to pay for the repurchase. In all, the company said it expects to buy 6 million shares--53% of its outstanding common stock--at a price of between $25 and $28 a share.
The company also said it will issue stock rights that may only be exercised in the event of a takeover struggle.
The moves will make Standard Brands much less vulnerable to a hostile takeover and may boost earnings per share next year, said Ward P. Lindenmayer, a consumer stock analyst for Sutro & Co., a San Francisco-based brokerage.
But by increasing interest expenses, the moves may also hurt the company’s ability to expand and compete in the already hotly contested home improvement industry, he said.
“They can do it and have it contribute to earnings . . . (but) I’m not so sure two or three years out this will be as beneficial as next year,” he said.
Standard Brands, which had 1986 sales of $326.6 million, made its announcement after the close of trading Tuesday. The company’s stock closed on the New York Stock Exchange at $21.50, up 25 cents.
An investor group led by the Bass family of Texas revealed last Friday in a filing with the Securities and Exchange Commission that it had bought a 7.2% stake in the firm for investment purposes.
On July 27, Standard Brands rejected a $300-million buyout offer from Chase Corp. The New Zealand real estate developer expressed interest in redeveloping some of the paint retailer’s 133 stores, most of them owned outright and many in valuable urban locations. In an Oct. 29 filing with the SEC, Chase said it still held a 6.7% stake.
Representatives of Chase and the Bass family could not be reached for comment.
Most of the stock buyback will be paid for by first mortgages on the company’s real estate. The mortgages will be used to secure $132.5 million worth of loans from two insurance companies, Standard Brands said.
The stock rights will be issued to all stockholders of record on Nov. 23 and may be exchanged for a special new class of shares only if an individual or group acquires 20% of Standard Brands stock or offers to buy 30% or more.
