SAN DIEGO — Henley Group Inc. announced Thursday it will spinoff a minority interest in its wholly owned Wheelabrator Technologies Inc. subsidiary in an initial public offering of Wheelabrator common stock that could raise up to $138 million.
An owner-operator of six trash-to-energy plants with 10 more under construction or in planning stages, Wheelabrator posted pro forma net income of $4.8 million on sales of $849.2 million for the fiscal year ended Dec. 31. For the first quarter ended March 31, Wheelabrator posted net income of $6 million on revenues of $240.6 million.
According to a preliminary prospectus filed with the Securities and Exchange Commission, Wheelabrator will use proceeds from the offering of up to 6.9 million shares to fund future refuse-to-energy plant projects and to augment working capital. Shares will be priced at about $20 per share, a Henley spokesman said.
Henley said it has not yet determined what percentage of total Wheelabrator shares outstanding the 6.9-million shares to be sold to the public will represent, except that it will be a "minority interest," a spokesman said. Henley will retain majority control of Wheelabrator, the prospectus said.
Laurence Lytton, a securities analyst with Drexel Burnham Lambert in New York who follows Henley, said he expected the 6.9 million shares to represent no more than 20% of Wheelabrator shares. All cash generated from the stock offering will go to Wheelabrator, the Henley spokesman said.
Based in Hampton, N.H., Wheelabrator will be the second Henley subsidiary to go public this year. In April, Henley spun off a minority interest in a medical products subsidiary, Fisher Scientific Group, to shareholders by issuing a stock dividend of one Fisher share for each 16 Henley shares owned.
Wheelabrator is a leading developer and operator of refuse-to-energy plants. The plants burn up to 3,000 tons or more of trash per day, generating up to 70 megawatts of power. Typically, Henley builds the plants after obtaining signed contracts to sell the energy to local utilities.
Henley stock closed up $1.125 at $26.50 per share on over-the-counter trading Thursday. Wheelabrator's chairman is Paul Montrone, 45, who is also president and managing director of the parent Henley Group. Wheelabrator's president and chief executive officer is Rodney C. Gilbert, 47.
The spinoff is consistent with Henley chairman Michael Dingman's oft-stated strategy of creating value for Henley shareholders, not through earnings growth, but by "creating a public market for selected Henley assets." Henley Group was formed in May, 1986, from 35 companies cast off by Allied-Signal Inc.
Lytton speculated that Henley may issue a Wheelabrator stock dividend to Henley shareholders after the initial public stock offering is completed. Underwriters of the offering are Merrill Lynch Capital Markets and Lazard Freres & Co.