Wickes Stock Leaps 40% Over News It’s in Play : 6 Million Shares Change Hands; Price Hits $13.25 as Potential Buyers Surface
Wall Street bet feverishly Monday on the prospect that Wickes Cos. will fetch a higher price than the $12-a-share management offer disclosed Sunday. As nearly 6 million shares changed hands on the New York Stock Exchange, the stock price of the debt-laden Santa Monica conglomerate soared 40% to close at $13.25, up $3.875.
Meanwhile, the investment adviser for Wickes’ special committee of independent directors reported that its telephones were “ringing off the hook” all day from prospective buyers responding to a 60-day “worldwide auction” of Wickes.
Interest was expressed in acquiring individual businesses owned by Wickes, as well as in the entire company, according to Michael Tennenbaum, vice chairman of investment banking at Bear, Stearns & Co.
Wickes Chairman Sanford C. Sigoloff, who shepherded Wickes through Chapter 11 bankruptcy proceedings three years ago, declined through a spokesman to comment on market reaction to the company’s disclosure that it was on the auction block.
Stock Was Languishing
Analysts, who agreed that those buying the stock expect a higher bid, seemed less certain about whether the Sigoloff management would sweeten its offer if a better one does emerge.
No one would predict that Sigoloff himself would stay on at Wickes if someone else ends up owning the company. A provision in the chairman’s contract provides that he can collect $5.8 million severance pay in event of a change in company control.
The timing of Sunday’s announcement was noted with interest by many observers. As recently as the Wickes annual meeting last June 23, management indicated that it was not planning a leveraged buyout.
As of last Friday, the company’s stock price was languishing at $9.375 on the New York Stock Exchange, and announcement of a loss for the second fiscal quarter was pending. In fact, a $12.4-million net loss was announced Sunday along with management’s leveraged buyout deal.
With a prospect that this would have forced the price lower, a source close to the Wickes board said Monday, the company’s stock price was a major concern. Sigoloff said Sunday that the second-quarter loss made it “unlikely” that the shareholders would see “short or intermediate-term appreciation” in the share price.
Although Bear Stearns made a finding that the management offer is fair to common stockholders, the investment banker also was commissioned to seek a higher bid and was offered a “lucrative incentive” if it succeeds.
In what was described as an unusual provision in such cases, the board left a “wide open avenue” for bidders to come forth during the next 60 days.
“I don’t know another management buyout where there has been an auction provision like this,” commented Tennenbaum.
Noting a barrage of inquiries, including some from abroad, the investment banker said his company has set up what amounts to a task force to handle it in the Los Angeles office. “We are talking only to those who have the financial capacity to buy the entire company or to buy a major unit of it,” Tennenbaum said.
Arbitragers Move In
He expressed optimism that a “superior alternative” to the $12-a-share proposal will appear.
Tennenbaum and others noted that the stock market is not necessarily an accurate forecaster of the ultimate price.
Some analysts say that Wickes has an asset value of $20 a share. Some major assets may well have to be sold individually in order to arrive at a better price to the company’s shareholders, according to observers.
Anthony Pearce-Batten of the Baltimore securities firm of Legg Mason Wood Walker Inc. said Monday: “I am not convinced that we are going to see the stock go a lot higher than this ($13 plus). It would be a stretch to 14 or 15 (dollars a share).”
He said management might be willing to bid higher, “but not much.”
Jeffrey Kahn, a Wickes shareholder who for months has been urging Sigoloff to take action to rescue the stock price from a deep depression, said there is no question that “the market action forces a higher offer.”
Once a large amount gets into the hands of arbitragers, as apparently happened Monday, Kahn said, “it is guaranteed that it will be sold a couple of bucks higher.” He added that he is “taking credit for putting the company into play.”
“I don’t have a clue as to who would want to acquire them,” commented Gregory H. Kieselman, an analyst at L. H. Friend & Co., Century City, adding “maybe a foreign buyer.” He noted that Wickes’ approximately $1.7-billion long-term debt could be a formidable obstacle to a prospective buyer.
But Matt Hagerty, of Oppenheimer & Co., in Los Angeles, is more optimistic: “My arbitrager’s hat tells me we are going to see a higher bid. There are going to be big players coming in at these prices.”
In addition to its Builders Emporium and Wickes Furniture subsidiaries, well known to the general public, Wickes also is a major automotive equipment manufacturer and claims to be the world’s largest maker of wall coverings and decorative products.
