Henley, Wasserstein to Buy Pneumo for $1.2 Billion

Henley Group of La Jolla and the New York investment banking firm of Wasserstein, Perella & Co. have joined forces to buy a manufacturing company for $1.2 billion, it was announced Thursday.

The deal breaks new ground for the fast-rising New York firm--whose founders are recognized as leaders in the takeover and merger business--as well as for Henley and its wheeler-dealer Chairman Michael D. Dingman.

Under the agreement, Henley and Wasserstein will end up as joint owners of Boston-based Pneumo Abex, a subsidiary of IC Industries, a Chicago conglomerate that has been selling off its manufacturing divisions to focus on consumer products. IC will retain 49% of Pneumo Abex’s defense systems business.

Pneumo Abex--a mini-conglomerate in itself--is composed of seven companies, including the nation’s leading maker of aircraft landing gear, flight control equipment, auto and truck brakes and loading bridges at airports. Pneumo Abex operates a hydraulic pump manufacturing plant in Oxnard.

‘Nicely Run’ Companies

Most likely, Pneumo Abex will be broken up and sold--a strategy Dingman has pursued successfully at Henley. Henley was created two years ago as a combination of industrial firms spun off by Allied Signal. Under Dingman, Henley itself has spun off companies to the public.

“We’re treating it as an investment,” said Dingman, who estimated the break up and sale of Pneumo Abex should be completed within two years. Dingman added that Henley will take an active role in the management of Pneumo Abex.

For the most part, Dingman said the new companies are “nicely run. They’re just bundled together in a large IC. We’re just sort of a wholesale buyer that came in to give IC an opportunity to let them go and build their consumer business.”

Robert McKeon, a managing director at Wasserstein, Perella & Co., said Pneumo Abex’s divisions are all “leading companies in their markets and they are very well managed.”

Henley and Wasserstein, Perella will end up providing only a very small portion of the $1.3-billion purchase price. The remainder will be raised through bank loans and so-called junk bonds. Pneumo Abex will be pledged as collateral against those loans.

“Under this structure, you could do more deals without committing all of your equity,” said Dingman. Dingman said the company might use the same financial strategy to acquire other companies.

More Deals Possible

“It’s a very attractive investment opportunity with very little risk,” said Laurence Lytton, a securities analyst with Drexel Burnham Lambert & Co. “The most Henley stands to lose is $50 million,” he said.

On the other hand, Henley stands to make a 300% pretax gain on its investment if the Pneumo Abex companies were sold for $1.5 billion, Lytton said.

For Wasserstein, the deal with Henley marks the first time the firm has agreed to put up its own money in an acquisition. Normally, Wasserstein acts only as a financial adviser in corporate takeovers.

“This is a new step for us,” said McKeon at Wasserstein. “We’re putting up own our own money . . . and (we) end up owning a portion of the new company.”

McKeon said the firm might undertake similar deals with Henley or other partners.

The firm was founded earlier this year by Bruce Wasserstein and Joseph Perella after both resigned from First Boston, a prestigious investment banking firm.

The purchase of Pneumo Abex is expected to be completed by the end of August, the companies said.