Less than four months after emerging from reorganization under Chapter 11 of the U.S. Bankruptcy Code, Wickes Cos. said Tuesday that it will spend as much as $1 billion on a major acquisition within the next year.
Sanford C. Sigoloff, chairman and chief executive, made the announcement to shareholders who gathered Tuesday morning at the Sheraton LaReina Hotel near the Los Angeles International Airport for the company's first annual meeting in four years.
The announcement followed Wickes' successful offering last month of $553 million in preferred stock and debentures. The Santa Monica-based company said then that proceeds would be used for one or more acquisitions.
Sigoloff explained that an acquisition would help Wickes "accelerate the use of our $500-million net operating-loss carry-forward," accumulated before and during the company's reorganization. Wickes can use this carry-forward over several years to improve its profit picture. Wickes emerged from bankruptcy court protection in January--less than three years after filing under Chapter 11 in April, 1982.
Ironically, it was the 1980 acquisition of the Midwest retailer Gamble-Skogmo that doubled Wickes' debt and helped to precipitate the company's Chapter 11 filing.
As part of the restructuring, Sigoloff closed or sold off about 16 Wickes businesses, reducing annual sales by about 25% to $3 billion, slashed the work force to 24,000 from 40,000 and repaid $1.6 billion to creditors in a package of cash, notes and stock.
He said the company is paying off $55 million in interest expenses on funds borrowed to repay debt associated with the reorganization. As a result, he said, Wickes is "under enormous earnings-per-share stress." He explained that earnings per share could be improved by an acquisition.
However, Sigoloff told shareholders that he could provide no other details now except that Wickes is looking at a "number of businesses" and that the acquisition would be made "before the next annual meeting."
"We are looking for a company not in need of rejuvenation and which has earnings greater than our operating needs. That's all I can say," Sigoloff said.
In a question-and-answer session after the meeting, Sigoloff explained that, since Wickes' current strength lies in retailing, prospects would probably be national, consumer-oriented companies with strong product identities and earnings. Asked how Wickes would make the acquisition, Sigoloff said he was "open to all tactics" but added that his preference would be to avoid an unfriendly takeover.
Separately, he disclosed that he will be dining tonight with Saul P. Steinberg, who recently became Wickes' largest shareholder. Reliance Insurance, a subsidiary of Steinberg's New York-based Reliance Group, recently bought a 10% stake in Wickes for "investment," according to a filing with the Securities and Exchange Commission. He said Steinberg, with whom he met once before, initiated the meeting.
Sigoloff also told shareholders that Wickes' debt and equity securities will be relisted on the American Stock Exchange within the next 30 to 50 days. They are now on the National Assn. of Securities Dealers' over-the-counter list and the Pacific Stock Exchange.