Wickes Cos. said Monday it is selling its 85% stake in its British subsidiary for about $155 million and is planning a reverse stock split that would greatly reduce the Santa Monica company's number of shares outstanding.
In addition, Wickes intends to redeem $200 million in debt issued as part of the company's 1985 bankruptcy reorganization.
Wickes Chairman Sanford C. Sigoloff said the unrelated actions are designed "to improve the operating structure of the company, improve its balance sheet and enhance its attractiveness to investors."
Wickes will sell its holdings in Wickes PLC to a group headed by the London-based unit's management for 96 million pounds, or about $155 million at current exchange rates.
Wickes will record an after-tax gain on the transaction of about $120 million, the company said.
Reverse Stock Split
Wickes' shareholders will be asked to vote on the reverse stock split, which would exchange one new Wickes share for every five current shares, at the June 18 annual meeting. Wickes had 239 million shares outstanding on Jan. 31.
Wickes is proposing the reverse stock split to make itself more attractive to institutional and other investors by raising the stock price and to decrease the costs of large transactions, a company spokesman said. Wickes stock, which had traded as high as $7 in the last year, closed Monday at $4, up 12 1/2 cents, on the American Stock Exchange.
The conglomerate also said that if market conditions remain the same it will redeem its 12% senior subordinated debentures due in 1994. Wickes said it will call in the $200 million in debt on Dec. 1, the first date the company will be able to redeem the securities under the reorganization plan.
"I think these are useful developments," said Anthony Pearce-Batten, an analyst with the Baltimore investment firm of Legg Mason Wood Walker.
"The three announcements collectively suggest an acknowledgement of the investment community's generalized concerns" about Wickes, Pearce-Batten said. "People are concerned about the level of leverage," he said, adding that Wickes will be able to reduce debt with the proceeds of the sale.