97.5% of AFG Shares Tendered as Firm Goes Private in $917-Million Deal
The AFG Industries trading symbol disappeared from the New York Stock Exchange before the market opened Wednesday, in the first concrete sign that Chairman R. D. Hubbard had succeeded in taking the company private in a $33-a-share tender offer that ended Tuesday night.
So many shares were tendered by stockholders that it took until after midnight for company officials to count them. A convincing 97.5% of the outstanding shares--far more than the 75% minimum set by the company--were tendered in a deal valued at about $917 million.
It will take a few weeks to complete the paper work, but when it’s done, the flat-glass manufacturing giant will become a wholly owned subsidiary of Clarity Industries, the private holding company Hubbard formed last February to complete the transaction.
“We were expecting it (the resounding response),” said Roger Kennedy, AFG’s vice president for marketing. “AFG expects business to carry on as in the past. I don’t think you’ll see as much aggressive expansion. . . . But you’ll still see AFG growing, no question about it.”
AFG was formed in 1979, 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.
The company achieved its position as the nation’s No. 2 flat-glass maker--behind PPG--by emphasizing the higher-margin areas of the glass business, niches such as shower door and appliance glassmaking where it could be the country’s top supplier.
In 1987, AFG’s sales increased 20% to $488 million, compared to $406 million in 1986. Earnings rose 9% to $58.4 million from $53.3 million the previous year. And Hubbard has predicted that the company’s recent expansion efforts would produce even more growth in 1988. Such growth--and the stock market’s lack of response to it--was one reason that Hubbard announced last Feb. 25 that he would take AFG private. The other was fear of a possible takeover.
“We had put out our projections based on what we thought we were going to do this year, which I thought were outstanding,” Hubbard said in a recent interview. “We said our sales would be up around 35% to 45% and earnings would at least equal that. The market place really didn’t react. We thought that a way to maximize the shareholders’ value was to take it private.”
Hubbard made his all-cash offer March 1, and its deadline was extended three times. The first extension was to accommodate the inquiries of Forstmann Little, a potential suitor. After the investment banking firm failed to make an offer on the company, the tender-offer deadline was extended two more times because of paper work difficulties, Kennedy said.
During that time, Hubbard packed up AFG’s plush Irvine headquarters and moved the firm to Fort Worth. “Our plants now are not only nationwide but also in Canada,” he said. “Since we’re going private, we feel that we would be better off being centrally located.”
The final deadline for the tender offer was 5 p.m. EDT Tuesday. By last Friday, 14.8 million shares had been tendered, just over 50% of the 28.5 million outstanding. But when the counting was finished early Wednesday, an estimated 27.8 million shares had been tendered.
“I think it (97.5%) is a lot to tender,” said Larry Selwitz, an analyst with the Los Angeles brokerage firm of Bateman Eichler, Hill Richards. “But this was fairly clean cut. There was not an expectation that there would be a higher company offer or an offer from outside companies.”
AFG stock will be missed, Selwitz said. “That was the best stock pick we’ve had in the past few years,” he said. “It’s been a very good one for us. But it’s over. The fat lady has sung.”
One of Hubbard’s takeover attempts--in addition to his unsuccessful efforts for Lear Siegler and GenCorp--was a play for MeraBank, an Arizona savings and loan. Donald A. Pattison, an analyst with the New York research firm of C. J. Lawrence, Morgan Grenfell, said Hubbard was roundly criticized at the time by analysts and investors.
“Now he (Hubbard) can buy savings and loan companies without being criticized,” Pattison said. “Analysts and investors liked the company (AFG) because it was a very pure play on the glass business. But they didn’t want to buy a conglomerate.” Pattison has always considered Hubbard a particularly savvy salesman, one who “wears gold chains and sandals in Newport Beach, cowboy boots and a string tie in Tennessee and a suit with a checked shirt and tie in New York.”
