Wickes Cos., twice rebuffed in takeover efforts this year, said Saturday that it will pay $1.16 billion for Collins & Aikman, a well-regarded and highly profitable manufacturer of upholstery fabrics and wall coverings.
The acquisition is the second billion-dollar purchase recently for Santa Monica-based Wickes, a lumber and building products company that operates Builders Emporium and Ole's (another recent acquisition).
Wickes astounded the investment community 14 months ago by closing a $1-billion cash deal for Gulf & Western's consumer and industrial products businesses, just nine months after emerging from the protection of bankruptcy court.
Wickes Chairman Sanford C. Sigoloff, 56, who has engineered the company's turnaround over a nearly three-year period, said in a statement that the acquisition of Collins & Aikman "is an excellent fit not only because of the added dimension that it brings to Wickes' home furnishing and automotive segments, but also because of the resulting synergy it provides with businesses within those segments."
Although Wickes is primarily a retailer, it also is a leading distributor of automotive replacement parts and accessories and serves the replacement automotive and fabric markets. In addition, its Kayser-Roth unit makes, sells and distributes apparel and hosiery.
To win Collins & Aikman, Sigoloff is paying a hefty premium. The offer of $53 a share is 39% higher than the stock's trading price on Friday.
Collins & Aikman, a New York-based company that dates to 1843, has won praise on Wall Street for its successful strategy of serving specialized markets.
"Of all the diversified textile companies, Collins & Aikman has been the best performer over the last couple of years," said Florence Kawoczka, a textile industry analyst with Johnson Redbook Service in New York. "It has been the least hard hit by imports because of its niches."
Products Found in Cars
It is likely that most Americans have come into contact with the company's products in planes and automobiles. The company makes fabrics for wall coverings as well as for the interiors of airplanes and cars--markets that have been almost unscathed by imports. It also has a bath fashions division making bath rugs, carpeting, shower curtains and accessories and a floor coverings unit.
In recent years, the company has made major investments in its plants, which now are viewed as highly efficient and a prime reason for Collins & Aikman's solid financial performance. The plants are in North Carolina, Oklahoma, Tennessee, Georgia, New York, Indiana and Rhode Island, in addition to Canadian facilities in Quebec and Ontario.
According to a recent report by the Value Line investment service, the company's "obviously successful strategy" has called for limiting exposure in the hard-hit apparel industry, which now accounts for less than 10% of sales.
Last year, the company had sales of $1.1 billion and net income of $66.4 million. On a pretax basis, profit was $116.1 million. The pretax figure is significant for Wickes. As a result of the acquisition, it will be able to shelter Collins & Aikman's U.S. profits from federal taxes with tax benefits carried forward from Wickes' years of heavy losses.
Wickes had 1985 sales of $2.8 billion, with net income of $76.1 million.
Both Boards OK Deal
Wickes spokesman Michael Sitrick said the two companies have been negotiating for the last month. Both companies' boards approved the deal Friday.
Collins & Aikman will operate as a separate entity within Wickes with its own management team, Sigoloff said. Donald F. McCullough, Collins & Aikman's 61-year-old chairman and chief executive, will join the Wickes board.
McCullough said: "We view the acquisition of C&A by Wickes as an opportunity to grow our businesses at a more accelerated rate than would have been possible had we stayed independent."
Wickes said it will begin its $53-a-share tender offer Monday for all of Collins & Aikman's 21.8 million shares. Unless extended, the tender offer will expire Dec. 9, according to Wickes' statement.
Building Up Cash Reserves
Since emerging from bankruptcy court, Wickes has concentrated on raising cash for acquisitions. In addition to buying the Gulf & Western unit, which included Kayser-Roth, the company last May purchased Home Centers West and Orchard Supply Hardware from W. R. Grace & Co. for undisclosed terms. That sale included the Ole's Home Improvement chain.
In April, the company was rebuffed in a $1.23-billion bid for National Gypsum, which ultimately agreed to a leveraged buy-out by management to thwart the Wickes takeover. Wickes next turned to Owens-Corning Fiberglas, a building products maker, but that company also chose to restructure rather than be acquired.
In trading on the American Stock Exchange last week, Wickes was the second most active issue, closing Friday at $4.50, unchanged from Thursday. Collins & Aikman, trading on the New York Stock Exchange, closed Friday at $38 a share, up $2.375.