NEW YORK — Shares of Colt Industries stock Monday soared $26.87 1/2 to close at $93.62 1/2 on the New York Stock Exchange following Colt's announcement of a plan to distribute more than $1.6 billion to its shareholders.
A recapitalization plan approved by the Colt board of directors Sunday would increase shareholder return and employee ownership while adding to the company's debt.
Colt's stock closed Friday at $66.75 a share in composite NYSE trading and jumped to $96 a share as trading got under way Monday on the Big Board. The stock settled back a bit and was trading at $93 apiece by mid-morning, edging higher toward the close.
Under the plan, each share of the company's common stock, other than those held in the retirement savings plan, would be exchanged for $85 in cash, a total of about $1.6 billion, and one share of stock in the recapitalized company.
There were 19.6 million common shares and equivalents outstanding as of June 29, said P. C. Williamson, a Colt spokesman.
Analysts were generally enthusiastic about the plan.
The restructured company "might be awful, but it might be great," said analyst Walter Kirchberger of Paine Webber. "It's an exciting piece of paper with a lot of leverage."
Analyst Carol Neves of Merrill Lynch said the company might shed some of its industrial divisions to help reduce the debt. "They could become more aggressive in terms of selling pieces that do not have positive cash flow," she said.
She said the company would probably want to keep its aerospace and automotive units, which have been among the better performers.
Colt, originally a maker of handguns and rifles, has recently sold some industrial units, including machine tools, specialty metals and a pumps unit. In 1985 it acquired Walbar Inc., a maker of components for jet engines.
The New York company said it did not know how much the new shares would be worth. Analysts said the market, based on Monday's trading, appeared to be valuing the new stock at about $8 a share.
Under the plan, the 1.4 million shares now held in the company's retirement savings plan would not be exchanged for cash. Instead, each old share would be exchanged for a number of new shares.
The number of new shares would be equal to the sum of one old share plus $85, divided by the median of the closing sale price of the new shares on the NYSE during the 15 trading days following consummation of the recapitalization.
In a statement released Sunday, Colt's Chairman and Chief Executive David I. Margolis said the plan provides "public shareholders the opportunity to receive, in exchange for a portion of their equity, a cash payment at a per-share value substantially higher than historical prices of Colt shares."
The company said the plan, which must be approved by shareholders, would also increase incentives to employees participating in the retirement savings plan, in which there are currently 5,000 participants.
About $1.6 billion would be needed to finance the recapitalization and cover related expenses, Colt said. The company would have to borrow $1.42 billion; the rest would come from Colt's cash resources.
Shareholders will be asked to vote on the proposed plan at a special meeting, which has not been scheduled. The plan is also subject to acquiring the necessary financing and approval for Big Board listing of the new shares.
The recapitalization would consolidate a larger portion of the company's ownership in Colt's retirement plan and would increase Colt's debt, making the company a less attractive takeover target.
Williamson said, however, that the plan "is not in response to a takeover attempt."