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Fluorocarbon Chief Says Firm Isn't Up for Sale : American Strategic Investments Raises Its Stake in Laguna Niguel Company

February 05, 1988|JOHN CHARLES TIGHE | Times Staff Writer

Fluorocarbon Chairman Peter Churm said Thursday his company isn't for sale and vowed that it will not be taken over after a firm owned by New Zealand investors said it had acquired an 8.6% stake.

American Strategic Investments, New York, has been buying shares of Laguna Niguel-based Fluorocarbon for more than a year. It reported to the Securities and Exchange Commission this week that it has bought 10,000 more shares, bringing its total to 370,400 shares.

Churm also said he has told American Strategic Chairman Dugald Fletcher that an American Strategic representative is not entitled to sit on his company's board of directors. Fletcher talked with Churm in Laguna Niguel earlier this week in a get-acquainted visit.

"They had professed that they were only buying on a friendly basis, but it had become pretty aggressive," said Churm, who invited Fletcher for the visit.

"He wouldn't answer what their intentions were," Churm said. "But I'm not so sure that they know their intentions."

Fletcher Refuses to Tell

In an interview from his New York office Thursday, Fletcher declined to divulge his firm's plans for the investment in Fluorocarbon. Fletcher said that American Strategic was formed in August, 1986, to invest in U.S. companies.

His firm became interested in Fluorocarbon in late 1986, when it was "looking at industrial companies that we thought were undervalued," he said.

Fletcher and several industry analysts said they still consider Fluorocarbon to be undervalued.

But analysts said a hostile takeover of the maker of rubber, plastic and fluid sealing products would be difficult, because most stockholders support Churm's leadership.

Churm owns 333,000, or 7.7%, of Fluorocarbon's 4.3 million shares outstanding, and he has options to buy 125,000 more shares. Other directors and officers also hold large stakes, with total insider control of about 18%.

About 40% of the company is owned by institutions, "which are generally supportive of management," said Edwin Lewis, an analyst with First Kansas City Securities, a stock brokerage firm in Kansas City, Mo.

"I think a takeover would be difficult without the consent of management," Lewis said.

Anti-Takeover Failure

However, Fluorocarbon management failed less than a year ago to win shareholder approval of a proposal containing anti-takeover provisions.

The June, 1987, proposal, which was part of a reincorporation request, contained the following provisions: to create staggered terms for directors, limit the ability of shareholders to call a special meeting and increase management's ability to take actions to thwart a hostile takeover.

Churm said at the time that the defeat of the management-backed package appeared to have been dealt by institutional investors concerned that the proposal would give management the ability to reject acquisition bids that might favor investors.

The proposal was opposed primarily by pension funds, trust departments and other institutional holders of Fluorocarbon stock, he said.

Citibank is the largest institutional holder, with 301,000 shares of stock, or 7%. It opposed the plan.

'Super-Majority' Sought

Churm said Citibank's principal reason for objecting was a provision requiring a "super-majority" of 80% of shareholders to approve a change in control of the corporation. Because Fluorocarbon officers and directors own nearly 20% of the company's stock, management would be given great control over a veto.

Fluorocarbon isn't the only company that has received interest from American Strategic. The firm owns 6.9% of the stock of Van Dorn, a Cleveland-based machinery maker, according to reports filed with the SEC in December.

Fletcher said his ownership in Van Dorn also is "an investment." Fluorocarbon is a customer of Van Dorn equipment, but Fletcher said that the relationship is a "coincidence" and that there is no direct relationship between the two investments.

FLUOROCARBON AT A GLANCE

Based in Laguna Niguel, the company is a diversified producer of specialized plastic and rubber devices and fluid seals used by manufacturers of automobiles, aircraft and other major industrial products. In 1987, Fluorocarbon acquired the polymers division of Eaton Corp., an acquisition expected to double its annual revenue. Year ends Jan. 31

(in millions) 1988* 1987 1986 1985 1984 Revenue $123.6 $97.8 $104.0 $94.2 $76.6 Net income $4.1 $4.0 $6.1 $5.7 $3.2

* 9 months

Assets $159.3 million

Number of employees 2,150

Shares outstanding 4.3 million

52-week price range $18.125-$11.00

Thursday's closing price (OTC) $14.25, up $.25

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