Moving to block a hostile takeover bid, Gencorp Inc. on Monday unveiled a massive restructuring plan that includes a $1.63-billion stock repurchase and the sale of its soft drink bottling and broadcast operations, as well as the General Tire business from which the conglomerate was born.
The company, under siege by an investment partnership composed of AFG Industries of Irvine and Wagner & Brown of Midland, Tex., offered to repurchase up to 54% of its stock for $130 a share at a total cost of $1.63 billion.
Gencorp said it would repay the debt it must take on to complete the offer by selling about half of its assets, including the tire-making operations that date to the firm's founding in Akron nearly 72 years ago as General Tire & Rubber Co.
Although a stock repurchase had been widely expected, analysts were somewhat shocked by its size and the price. Nevertheless, they generally predicted that the defense would repel the takeover.
"It's a strong response, and the audience is applauding management," said Mario Gabelli, a New York pension fund manager whose investments include 1.4 million Gencorp shares, about 6.3% of the company's total shares outstanding.
However, some analysts said the stock repurchase and asset sale might be too strong a medicine.
"They've gone too far. They've decimated the company. There's not enough equity left to support the company," said Donald De Scenza, an analyst with Nomura Securities International in New York. "It will take years to rebuild the shareholder equity."
The investor group that had said it was willing to pay $110 per share for all of Gencorp's shares had no immediate response to the restructuring plan.
On the New York Stock Exchange, Gencorp shares jumped $4 Monday to close at $119.
Even if it loses the takeover bid, General Partners--which has purchased 2.2 million shares, or a 9.8% stake in Gencorp--could make a healthy profit on the repurchase.
The partnership paid an average of about $81.65 per share and is eligible to sell back 54%, or 1.18 million shares, at $130--a gain of 59.2% on the shares that would be sold to Gencorp.
Under Gencorp's proposed restructuring, the company would be left with Aerojet General, a La Jolla-based military contractor, and DiversiTech, a plastics and industrial products manufacturer. The two are operations that the company said "have the greatest growth potential."
In Gencorp's 1986 fiscal year ended Nov. 30, the two divisions accounted for 50% of the company's total sales of $3.1 billion and 57% of its $130-million profit. Chairman and Chief Executive A. William Reynolds said projections call for even greater profits during the next two years.
Gencorp said it also would step up the pace of the planned sale of its RKO General radio and television stations and would move quickly to sell the tire-making and Pepsi bottling operations. The company said it expects the divestitures to generate about $1.4 billion after taxes within the next 18 months.
Proceeds would be used to reduce the $1.75-billion loan the company said it will need to repurchase its stock and complete the restructuring.
Although Gencorp declined to reveal possible buyers for its properties, industry observers speculated that AFG Industries, one of its suitors, might be interested in the tire operations.
AFG, which makes residential and automotive glass, earlier had said it would like to sell its auto glass through General Tire's retail outlets. Other analysts said Gencorp's management might try to acquire the tire operations through a leveraged buyout.