The investment group that is buying Lear Siegler for $2.18 billion has disclosed in a filing with the Securities and Exchange Commission that it does not have any immediate plans to break up the Santa Monica conglomerate.
The investment group, led by the New York firm of Fortsmann Little & Co., said in the filing Friday that it plans to run Lear Siegler's businesses "essentially as they are being conducted."
However, Fortsmann Little said it may change those plans after it evaluates Lear Siegler's businesses more completely. The investment group said it would conduct the evaluation after it completes the $92-a-share buyout.
Lear Siegler, a takeover target since last October, agreed to be acquired by Fortsmann Little on Dec. 16 after a previous agreement with Wickes Cos. collapsed. Fortsmann Little specializes in leveraged buyouts--financing an acquisition from the sale of some of the acquired company's businesses or from its cash flow. It was widely expected that Fortsmann Little would sell some of Lear Siegler's businesses.
But Fortsmann Little said in the SEC filing that it intends to finance the Lear Siegler acquisition with a $1.35 billion loan from a consortium of banks led by Manufacturers Hanover Trust and $600 million in subordinated debentures. Fortsmann Little said individuals and other companies controlled by Fortsmann Little would contribute another $200 million in equity. Lear Shegler's $35 million in cash would also be used to help finance the acquisition, according to the SEC documents.
The papers say the company will retain the Lear Siegler name and remain in Santa Monica. In addition, Norman A. Barkeley, Lear Siegler chairman, chief executive and president, will remain president of the company when the buyout is completed; it did not say whether the other titles would be continued. It is expected that he and other current Lear Siegler executives will take an equity interest in the company, the documents said.
The filing indicates that Fortsmann Little first expressed an interest in acquiring Lear Siegler in October, when the conglomerate was fighting an offer from AFG Partners, an investment group formed by Irvine glass manufacturer AFG Industries and Wagner & Brown, a Midland, Tex., oil and gas partnership.
After the $93-a-share merger with Wickes unraveled, the documents said, Fortsmann Little was one of 10 firms to receive confidential information about Lear Siegler from the investment banking firm of Drexel Burnham Lambert, which represented Lear Siegler.
Fortsmann Little's bid was accepted after Drexel advised the company on other options: A liquidation, Drexel said, would be worth between $65 and $74 a share under the new tax code and a recapitalization would be worth between $83 and $94 a share, depending on how much debt the company took on.