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Wickes OKs $538-Million Buyout by Two Investment Firms; Sigoloff Will Leave

Times Staff Writers

Wickes Cos., the Santa Monica owner of Builders Emporium that was the object of a failed management buyout, agreed on Wednesday to be acquired by two New York investment banking firms for about $538 million.

Chairman Sanford C. Sigoloff, who stars in the company’s “We Got the Message, Mr. Sigoloff” commercials, will stay on briefly and then leave the firm he brought out of bankruptcy three years ago, a company spokesman said.

The announcement came just 12 days after Sigoloff and fellow managers abruptly dropped a $574-million bid for the company, citing expectations of a $40-million drop in operating income for the year ending next Jan. 31.

The investment banking firms buying Wickes are Blackstone Capital Partners and Wasserstein, Perella Partners. Under the agreement, they will buy all of the firm’s 47.8 million outstanding stock for a combination of cash and securities worth a total of $11.25 a share.

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Wickes said its board approved the deal unanimously, apparently ending a two-month saga that began when Sigoloff first disclosed the $12-a-share buyout offer that collapsed. As recently as last week, Sigoloff vowed to stay on at Wickes and make another offer.

But in the early hours of Wednesday, a deal was completed that would turn over to two new co-chairmen the far-flung retailing, auto products, and textile firm that Sigoloff built.

Terms call for 80% of Wickes’ outstanding stock to be purchased for $11.25 per share in cash. Each share of the remaining 20% would be exchanged for 0.45 shares of preferred stock in the new Wickes parent company, WCI Holdings. The company said the new preferred stock would have a liquidation value of $25 a share.

James R. Birle, 52, a Blackstone partner and former senior vice president of General Electric, and Robert B. McKeon, 34, a managing director of Wasserstein Perella, will serve as co-chairman of Wickes. Both men were said to be meeting with Sigoloff on Wednesday and did not return phone calls from The Times.

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Stock Gains

The buyers, who also will assume more than $2 billion in Wickes debt, said in a statement that they were “pleased with the opportunity to acquire a fundamentally solid company with excellent operating management.”

A spokesman for the buyers added, however, that they will begin a careful review of the company’s many units to see whether they will keep Wickes intact.

Anthony Pearce-Batten, an analyst with Legg Mason in Baltimore, said the new offer “is going to call for some very quick cost-cutting.”

In trading on the New York Stock Exchange, Wickes closed Wednesday at $9.50 per share, up $1.675. It was one of the most heavily traded stocks, with 3.3 million shares changing hands.

The change in ownership of Wickes also would mean compensation for top officials at Wickes. The company’s annual proxy statement says that if another company buys Wickes, company officers would receive a total of $17.7 million in severance pay. Sigoloff would receive $5.8 million, according to the proxy statement.

Sigoloff, 58, was not available for comment but released a statement saying Wickes is “delighted that our shareholders will have the opportunity to realize the benefits offered to them” under the purchase agreement.

The Wickes spokesman said Wednesday night that he did not know what is next for Sigoloff. “With Sandy’s track record, reputation and level of accomplishment--having completed three successful major corporate turnarounds, there has been a great deal of speculation of what he would tackle after Wickes,” he said. “After the merger is completed, we will find out.”

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Once again, Sigoloff finds himself out of a firm that he has painstakingly rescued.

Although he has built a nationwide reputation as a tough and successful corporate turnaround expert--Mr. Chapter 11 or “Ming the Merciless"--Sigoloff still has not had an opportunity to follow up his rescue efforts with a long run as a chief executive in a relatively crisis-free environment.

Moved Quickly

After two years at mini-conglomerate Republic Corp., where he liquidated more than 50 money-losing divisions, he left because of discord with its board. Later, Sigoloff left Daylin, his first bankruptcy reorganization, when the Los Angeles-based retailer was bought by W. R. Grace & Co.

Since Wickes emerged from bankruptcy, Sigoloff has transformed the company from a retailer to a diversified consumer and industrial products company that today sells wallpaper, auto upholstery and operates a chain of hardware stores.

Sigoloff moved quickly. He purchased the consumer and industrial products businesses of Gulf & Western Industries for about $1 billion in cash. He made other acquisitions and divestitures, financing many of the deals through “junk bonds” with the help of Drexel Burnham Lambert. He made one unsuccessful bid for Owens-Corning.

Lower Forecast

But Sigoloff, who earned $1.8 million in yearly salary and bonuses, has been subject of shareholder criticism for Wickes’ low stock price and for a reverse stock split. His management group bid, which was to have been financed by junk bonds by Drexel, was abruptly canceled two weeks ago because of the lower-than-expected earnings.

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Market insiders speculated however, that the lower-than-expected earnings might have been a mask for Drexel inability to line up financing for the deal. A Drexel spokesman dismissed the speculation as “absolutely not true.”

The offer for Wickes is the first joint venture by Blackstone Partners and Wasserstein Perella, according to Tom Campbell, an associate at Wasserstein in New York.

Campbell said the offer calls for Wickes’ bank, Continental Illinois Bank & Trust of Chicago, to commit $215 million in financing. An additional $215 million, plus expenses and fees, will be divided equally and contributed by Blackstone and Wasserstein Perella.

Management Praised

If the offer goes as planned, Campbell said, the buyers plan to immediately refinance the debt with long-term public securities such as high-yield bonds.

He said the buyers plan to examine every Wickes operation to “determine on a situation by situation basis if there is an opportunity to realize some value.” Campbell said there may be some divestitures, but there are no specific plans. “There is excellent management at Wickes on the operating level.”

The Los Angeles office of Bear, Stearns & Co. has been handling the sale for Wickes directors. Michael Tennenbaum, vice chairman of the firm’s Los Angeles investment banking group, said: “My impression is that these people give substantial recognition and authority to the line management people.”

“I believe the shareholders will be well served in the final analysis, and the buyers are going to do just fine,” Tennenbaum said.

Jeffrey Kahn, an attorney who owns 16,000 shares of Wickes stock, has been highly critical of Sigoloff’s management.

“I’m pleased with the outcome,” said Kahn. “My objective was to instigate a sale and to that end, I feel I’ve met with substantial success.”


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