Stock Repurchase Authorized : Henley Group to Split Into 2 Public Companies
In the latest in a succession of restructuring moves that began shortly after it was formed two years ago, Henley Group said Wednesday that it is dividing itself into two publicly held entities, a realignment designed to focus more investor attention on its refuse-to-energy business.
Henley, which is based in La Jolla, also said its board had authorized the repurchase of up to 20 million of the 90 million Henley shares now outstanding. Henley already has bought back 39 million of its shares since going public in May, 1986, after having been spun off by Allied-Signal.
In addition, Henley said Wednesday that it plans to sell $1 billion in bonds, with the proceeds to be used to pay off $980 million in bank debt.
Part of Henley’s bank debt was taken on over the past year to acquire a $1-billion, 15.7% stake in Santa Fe Southern Pacific, the railroad, energy and real estate company that Henley is trying to take over. Henley has been stymied so far in those efforts by a series of SFSP defensive moves, however.
At a board meeting Wednesday, Henley directors discussed whether to proceed with a planned proxy fight for representation on SFSP’s board but no decision was reached, a Henley spokesman said.
The stock market reacted favorably to Henley’s restructuring announcement Wednesday. Henley shares closed up $1.75 at $25.625 in over-the-counter trading. Volume was heavy, with 1,630,500 shares traded.
According to the restructuring plan, Henley’s assets will be divided between two public companies: Wheelabrator Group and Henley Group. Oddly, the latter--though its name is the same as that of the present company--will be the newly created entity. Current Henley shareholders will receive stock in the new company as a partially taxable special dividend.
At least 90% of Henley’s assets will be placed in the Henley Group entity. Assets remaining in the Wheelabrator Group will all be related to Wheelabrator’s business of converting waste materials into energy. Wheelabrator Group’s principal asset will be Henley’s 80% stake in Wheelabrator Technologies, worth $650 million. Henley spun off Wheelabrator Technologies through a $119-million initial public stock offering last September.
Eli Lustgarten, an analyst with the investment firm of Paine Webber in New York, said Henley is motivated in its latest restructuring move by the desire to take advantage of the high valuations that the stock market is currently giving to waste management companies such as Ogden Corp., Browning-Ferris Industries and others.
Lustgarten said the bond offering, paired with Henley’s expanded credit agreement, may give the company the resources with which to buy additional SFSP shares or to pursue some other acquisition.
After going public at $19 a share in September, Wheelabrator Technologies shares closed down 50 cents at $21.875 in over-the-counter Wednesday trading. Based in Hampton, N.H., Wheelabrator operates a dozen trash-to-energy and co-generation plants and has a half-dozen others under construction or in the planning stages. The company reported revenue of $849 million for fiscal 1986.
In addition to Wheelabrator Technologies, Henley spun off a minority interest in Fisher Scientific Group, a medical products company, to its shareholders last April. In December, Henley distributed to its shareholders a 45% interest in Henley Manufacturing Corp., a manufacturer of chemicals and automotive parts.
