Black & Decker Corp. on Wednesday launched a surprise $1.8-billion takeover bid for American Standard Inc., sending the stock of the manufacturing company soaring.
Black & Decker launched a tender offer of $56 a share for all of the 32.2 million outstanding common shares of New York-based American Standard.
American Standard jumped $20.875 to $58.875 a share in heavy New York Stock Exchange trading. Black & Decker dropped 87.5 cents to $19.50 a share.
Black & Decker, best known for its tools and home appliances, recently underwent an aggressive restructuring to broaden its marketing strategies, upgrade product lines and improve production efficiency.
At the company's annual meeting on Monday, Chairman and Chief Executive Nolan D. Archibald said Black & Decker would seek to acquire profitable and undervalued companies that make high-quality consumer and commercial products.
'Convinced of Merits'
Archibald on Wednesday said in a letter to William B. Boyd, his counterpart at American Standard, that he had been trying unsuccessfully for several weeks to meet with Boyd about a possible takeover.
"As we remain convinced that the merits of the plan deserve consideration, our only alternative is to take our proposal directly to American Standard's stockholders," Archibald wrote. "We believe that a business combination of Black & Decker and American Standard will result in a company that has far stronger growth potential than either could achieve alone."
American Standard issued a statement that its management would study the unsolicited offer carefully, and shareholders should not decide whether to tender their stock until the board made its recommendation.
Black & Decker officials were not available immediately for comment.
Some analysts said the rise of American Securities' share price above $56 indicated that investors believed Black & Decker might have to sweeten its offer in order to win the company or head off other bidders.
David Liebowitz, of American Securities Corp. in New York, also said the offer reflected Black & Decker's diversification strategy.
"Black and Decker has no intention of playing in the minor leagues," he said. "They are going to the significant players in the field, and clearly American Standard fits the bill."
Introduced New Products
American Standard is a 59-year-old diversified manufacturer whose products include plumbing, Trane air conditioning, automotive brakes and train signaling equipment.
Black & Decker's tools and other products range from power drills to its "Dustbuster" portable vacuum cleaners and an expanding line of home appliances.
In recent months, the company has introduced about 80 new power tool and house-ware products and some 700 new accessory items.
The tender offer and withdrawal rights expire at midnight on Feb. 24, unless extended.
Chase Manhattan Bank will provide $750 million in financing, Black & Decker said, and believes that it can arrange $1.25 billion worth of credit from a group of banks before Feb. 17.
Black & Decker on Monday posted first-quarter profit of $31.1 million, or 53 cents a share, on revenue of $612.3 million.
In the year ended last Sept. 27, the company had a profit of $55.6 million on revenue of $1.9 billion.
Sales for the quarter rose 16% to $612.3 million. The 12 months preceding the end of the first quarter also marked the first time Black & Decker sales exceeded $2 billion.
American Standard earned $188.5 million in 1986 on sales of $3 billion. The company plans to report its 1987 earnings next week.