AFG Chairman Seeks to Take Firm Private
Management of AFG Industries announced plans Thursday to take the Irvine glassmaking giant private in an $883-million tender offer that some major shareholders complained was too low.
The proposed buyout would be accomplished by a separate company created by R. D. Hubbard, the 52-year-old AFG chairman known for his flamboyant takeover plays as well as his success in building AFG into the nation’s No. 2 flat-glass manufacturer.
Although Hubbard’s $33-per-share offer represents a premium of more than 30% over recent trading prices for AFG stock, several large institutional investors said Thursday that they are reluctant to tender their shares.
“We’ll need to take a closer look at the offer, but it seems disappointing, and we’d rather just keep the stock,” said Susan Byrne, president of New York’s Westwood Management, which owns more than 400,000 shares of AFG.
“The management is very talented, specifically Mr. Hubbard,” Byrne said. “We think the company is worth more than that. AFG’s prospects for future growth are very exciting.”
Noted for His Luck
Although AFG officials were unavailable for comment, analysts speculated that Hubbard wants to take the company private because he can buy it at a bargain price and safeguard it from outside attack at the same time.
AFG was formed in 1978, when Hubbard combined two nearly bankrupt firms--private Fourco Glass Co. and publicly held ASG Industries. The company now commands an estimated 20% of the domestic glass market.
“Essentially, the company built its position by emphasizing the higher-margin areas of the glass business where they could be the No. 1 or No. 2 supplier, such as appliance glass and shower door glass,” said Debra Davis, a company spokeswoman. “They also went into the distribution business.”
Hubbard, a Newport Beach resident, is described by friends and business associates as a dynamic, imposing man who has had as much luck on the race track as he’s had on the fast track.
He is known for buying quarter horses and thoroughbreds at low prices--horses that have gone on to win big.
One long-time associate said the glass magnate puts in regular 14-to-16-hour days, and “no one person can keep up with him. It’s like being on a relay team trying to keep up with him.”
Hubbard’s best-known takeover attempts in recent years were unsuccessful: a $2.2-billion bid for Gencorp, an Ohio-based conglomerate, in 1987, and a $1.5-billion bid for Lear Siegler, a Santa Monica-based aerospace and manufacturing firm, in 1986.
Stock Price Jumps
AFG said it will launch a cash tender offer no later than Wednesday for up to 26.8 million shares of its common stock, or about 94% of the total outstanding. The offer, which has been approved by AFG’s board, is subject to a minimum of 21.8 million shares being tendered.
Upon completion of the offer, remaining AFG shares would be exchanged for preferred stock or a combination of cash and preferred stock.
Financing for the acquisition is to be provided by Drexel Burnham Lambert, which has agreed to sell high-yield bonds to private institutions, according to Steven Anreder, a spokesman for Drexel.
The tender offer announcement caused AFG’s stock to jump $5.75 per share Thursday to close at $32.50. The stock was the fourth-highest percentage gainer on the New York Stock Exchange with 1.7 million shares changing hands.
Analysts estimated that the net cost of taking the company private would be close to $750 million because AFG management already owns about 25% of the outstanding shares.
Just five weeks ago, AFG reported record sales and earnings for 1987. Sales increased 20% to $488 million and earnings rose 9% to $58.4 million. Hubbard predicted at that time that the company’s expansion efforts would produce even more growth during 1988.
Davis said AFG is the only U.S. glass maker with the capability to distribute its own products. It is also the only glass company, she said, that has been actively expanding over the past several years.
AFG acquired a Ford Motor auto glass subsidiary in late 1987 for an undisclosed price estimated by analysts to range from $100 million to $150 million.
AFG INDUSTRIES AT A GLANCE
AFG Industries manufactures glass products used in housing construction. The Irvine-based company is also known for its takeover attempts of Lear Siegler and Gencorp in 1986 and 1987, respectively. AFG recently began operation of a 500-ton-per-day glass factory in Victorville and will open a similar facility in Kansas later this year.
Year ends Dec. 31
(in millions) 1987 1986 1985 1984 1983 Revenue $488.4 $405.9 $320.0 $281.9 $213.7 Net income $81.7 $62.9 $21.1 $18.1 $14.1
Assets $519.7 million
Number of employees 6,250
Shares outstanding 28.5 million
52-week price range $32.50-$21
Thursday’s closing price (NYSE) $32.50 up $5.75
Chief executive R. D. Hubbard
