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Group Makes $559-Million Bid for CNW

November 10, 1987|From Reuters

CHICAGO — An investment group Monday offered $559 million for CNW Corp., the sprawling Midwestern railroad that has been a subject of takeover speculation for much of the past year.

The $30-a-share offer from the group led by the investment banking firm of Gibbons, Green, van Amerongen touched off strong stock market buying. CNW shares shot up $5 to $25 on the New York Stock Exchange, even as analysts said the bid was disappointingly low.

The investors group said it expects senior management to participate as investors in the deal. Under the proposal, CNW shareholders would get cash and securities worth an estimated $30 a common share. The offer expires at midnight Nov. 15.

Analyst Jeff Perry of C. J. Lawrence & Co. said he was "disappointed at CNW's announcement" because he still puts a higher value on the company's assets.

Higher Estimates

In August, C. J. Lawrence estimated that CNW was worth $58 a share. About the same time, Kidder, Peabody & Co. put a theoretical value of the company as a whole at $50 a share. CNW's stock in late August was trading at $29.

Perry said that following the stock market crash in October, "values (of CNW) were clobbered disproportionately to the market." He cited higher financing costs as a big factor in lowering values, as well as less liquidity for potential buyers.

C. J. Lawrence's Perry said: "I am not expecting a competing offer but wouldn't entirely rule out the possibility."

Investors have been attracted by the belief that CNW's 6,500 miles of rail lines and other assets would be worth more broken up and sold than as a single entity. In June, a Pittsburgh-based investor group, L. B. Foster Co., paid $58 million for 320 miles of CNW railroad and rail facilities.

The company made $58 million during 1986, mostly from one new coal-hauling route in Wyoming, and Dynamics Inc., a snowplow manufacturer.

In August, CNW announced that it was in talks with several potential acquirers, but no deal was disclosed.

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