A New York-based investment banking firm is considering whether to top a $573.8-million management buyout offer made last month for Wickes Cos., owner of Builders Emporium, according to sources close to the investment firm.
Blackstone Group, a New York firm that specializes in friendly buyouts, is studying a proposal to offer $13 to $15 a share, or about $620 million to $715.5 million. However, an investment banker familiar with the firm said Blackstone is being stymied by various tax and accounting complications involved in buying Wickes.
“They’re really interested,” the investment banker said of Blackstone. “They have spent a huge amount of money researching this thing.” But the investment banker said the plethora of technical and financial obstacles could ultimately cause Blackstone to loose interest in moving forward on a deal.
News of Blackstone’s interest in Wickes, however, did not impress Wall Street. In trading on the New York Stock Exchange, Wickes shares declined 62.5 cents Wednesday to $12.875.
Waited 60 Days
Santa Monica-based Wickes is a major supplier of upholstery to the automobile industry and a leading producer of wallpaper and decorative fabrics. It also operates home improvement and furniture stores, including Builders Emporium.
Last month, a management group led by Wickes Chairman Sanford C. Sigoloff and Drexel Burnham Lambert Inc. announced a $12-a-share buyout offer for Wickes. Anticipating that other interested buyers might make a higher bid, the management group decided to wait 60 days, or twice the legally required time, before buying stock.
Industry analysts said at the time that the Wickes management move resembled a combination buyout offer and auction for the company. The lengthy offer period, analysts said, was a way to satisfy shareholders who were frustrated with the company’s poor market performance and earnings.
Several Sticking Points
But with the Oct. 20 deadline for other bids only two weeks away, scores of potential buyers are passing Wickes up. Among the latest, sources said, was Merrill Lynch Capital Partners.
“The hard part to see is Wickes assets and what they are worth at this point in time,” said a Wickes analyst, who did not want to be identified.
Another sticking point, he added, is that “They (Blackstone) are an investment banking group and they don’t have anybody that can run the company.”
In addition to Wickes’ $2-billion debt load and complex tax considerations involving potentially lucrative writeoffs from previous years’ losses, some potential buyers have reportedly balked at steep fees to be paid to Wickes executives and Drexel if their bid is topped.
Among other provisions, terms of the bid require Wickes to pay a $20-million termination fee to Drexel if Wickes accepts a higher offer from a third party.
“I expect someone will come forth before the deadline,” the Wickes analyst said. “But I’m not surprised that lots of people have passed on the deal.”