Textron, an East Coast conglomerate that ranks as the nation's 13th-largest defense contractor, made an unsolicited $966-million cash offer Tuesday for Ex-Cell-O Corp., a suburban Detroit manufacturer of automotive parts, aerospace equipment and industrial tools.
Officials of Ex-Cell-O--which operates Ace Industries in Santa Ana, a turbine engine component producer, and Remex in Anaheim, which makes punch tape readers and spools for "numerically controlled" machine tools--declined immediate comment.
Investors quickly bid up the firm's shares to $73.37 1/2, a gain of $19.62 1/2 in heavy trading on the New York Stock Exchange. The closing price represents an 8.2% premium over Textron's $68-per-share offer for Ex-Cell-O and reflects widespread expectations that Textron or other bidders will increase the ultimate selling price.
Willing to Go Higher
Textron, which produces Bell Helicopters, Avco Lycoming turbine engines, B-1 bomber wings and electronics gear, signaled a willingness to go higher when it announced the bid.
Even so, Textron shares gained 37 1/2 cents Tuesday to close at $52.75, reflecting analyst expectations that the deal would not dilute Textron's per-share income even at a price for Ex-Cell-O of up to $80 per share.
In a letter made public Tuesday, Textron Chief Executive Beverly F. Dolan asked Ex-Cell-O Chairman E. Paul Casey for a response no later than noon Friday.
"We are willing at any time to discuss and negotiate any and all terms of the contract," Dolan said.
Analysts said the two firms share a number of lines of business and would fit well together, but they said Textron's primary motive in seeking Ex-Cell-O is to capture what is regarded as an undervalued asset.
"It is a reasonable match, but in economies of scale there aren't any advantages to be had," said Laurence Lytton, an analyst at Drexel Burnham Lambert. "Principally, Textron sees this as a financial acquisition. It gives them a pickup in their earnings and it enhances their growth rate."
Although Ex-Cell-O had no immediate response to the offer, few analysts expect the firm to take anti-takeover measures that might seriously injure the company.
"I don't think they will destroy the company to defeat this offer," said Phil Friedman of Drexel Burnham. "They have done a lot of positive things."
Even if Textron fails in its offer, analysts do not expect Ex-Cell-O to escape acquisition.
"Ex-Cell-O certainly has been exposed," said John Simon, analyst at Seidler Amdec Securities of Los Angeles. "Ex-Cell-O improved its balance sheet. It cleaned up its act. And now it's a target."
Ex-Cell-O was founded in Highland Park, Mich., in 1919 by a group of tool and die experts from Ford Motor. They set up a small shop only a few blocks from the factory where Henry Ford had built the world's first automobile assembly line.
The firm quickly moved into selling parts and fixtures for aircraft and in 1927 renamed itself Ex-Cell-O Aircraft & Tool Co. It took its present name in 1937.
The firm had sales of $1.14 billion in the fiscal year ended November, 1985, and employed 15,000 people around the country.
Production of turbine engine equipment and other aerospace products accounted for 36% of its fiscal 1985 sales and 54% of its profit.
Textron was founded by Royal Little in 1952 when he combined several unrelated businesses under one corporate umbrella in what historians consider the birth of the conglomerate.
The Providence, R.I.-based firm derives 49% of its sales from aerospace products.