Lear Siegler agreed Tuesday to be acquired by its Santa Monica neighbor, Wickes Cos., in a sweetened takeover deal valued at $1.7 billion.
The merger announcement capped a dramatic week for both companies. Wickes revealed its bid Monday, only two days after announcing a $1.16-billion acquisition of the New York textile firm of Collins & Aikman. Meanwhile, Lear Siegler has been juggling takeover offers and inquiries.
The two acquisitions would make Wickes a company with sales of more than $8 billion and assets of more than $6.5 billion, Wickes said. But the acquisitions will leave the retailing and manufacturing conglomerate heavily burdened with debt. Analysts have said that as a result, Wickes probably will be forced to sell parts of the operations it acquires.
$1.4 Billion in Cash Raised
A Wickes spokesman declined to comment on possible divestitures, but added, "We are confident that through income from operations and divestiture opportunities, our debt level will be quite manageable from both a balance sheet and cash flow point of view."
Wickes is expected to pay for its proposed acquisitions with $1.4 billion in cash raised earlier this year and a bank credit line it is negotiating. Wickes also has a letter from the Drexel Burnham Lambert investment banking firm stating it is "highly confident" it could raise more money, if needed, by the private placement of debt.
"We are extremely pleased to have Lear Siegler as part of the Wickes family," said Sanford C. Sigoloff, Wickes' ambitious chairman and chief executive.
Norman A. Barkeley, Lear Siegler chairman and chief executive, called the merger "a very attractive business combination" that is "consistent with our objective of enhancing shareholder value. In addition, our employees are joining a growing, vibrant company to which we expect to make a significant contribution."
Considered AFG Partners' Offer
The Lear Siegler board spent nearly two days deliberating in an effort to reach a decision by the 6 p.m. Tuesday deadline set by Wickes, whose headquarters sits nearby Lear Siegler's in the same industrial park in Santa Monica. Lear Siegler's directors also considered a $85-per-share offer from AFG Partners, expressions of interest from other "industrial entities" and a possible corporate restructuring, a company spokesman said.
Under the merger agreement, Wickes will launch a $93-per-share cash tender offer Thursday for all of Lear Siegler's common stock. It also will pay $232.50 per share for all of the company's preferred stock. The tender offer, which is subject to several conditions, will be followed by a merger in which the remaining shares will be purchased for the same price as those bought as part of the tender offer.
Wickes previously had offered $91 per share, or a total of $1.62 billion.
If the merger is completed, Lear Siegler will be operated as a separate entity with its own management, Sigoloff said. After the acquisition, Barkeley will join the Wickes board, he said.
Lear Siegler is an aerospace and manufacturing conglomerate that makes such things as sophisticated aircraft systems, auto seats, glass and Smith & Wesson handguns. Wickes operations include the Builders Emporium and Ole's home improvement centers, Wickes furniture stores, auto parts distribution and apparel manufacturing.
"We think the marriage is an excellent one," Sigoloff said. "We understand their core businesses and are anxious to do all we can to help them grow."
Wickes also has agreed to pay $160 million for the 9.8% stake in Lear Siegler held by rival bidder AFG Partners. AFG Partners is composed of AFG Industries, an Irvine glass manufacturer, and Wagner & Brown, a Midland, Tex., oil and gas company that has frequently been linked with takeover artist T. Boone Pickens Jr.
Wickes has been searching for acquisitions since it emerged from bankruptcy law protection in January, 1985. Recent Wickes' targets include National Gypsum, which escaped a $1.23-billion bid through a management-led buyout, and Owens-Corning Fiberglas, which restructured itself rather than accept a $2-billion offer.
Wickes was the most active stock on the American Stock Exchange with 1.44 million shares changing hands. Wickes stock slipped 12.5 cents to close at $4.625.
Lear Siegler's stock closed at $91, down $1 on the New York Stock Exchange. Collins & Aikman's stock rose 12.5 cents, closing at $52.625.
If the merger falls through because of certain conditions, which were not detailed, Wickes will receive $30 million, Wickes and Lear Siegler said in a joint statement.