A takeover bid was scrapped Tuesday for Grow Group Inc., whose plant in the City of Commerce had chemical leaks Saturday and Sunday that forced the mass evacuation of thousands of nearby residents.
PPG Industries said it was dropping its $300-million plan to acquire the New York manufacturer of paint and chemical coatings but gave no reason for the surprise decision.
The announcement sent the stock of Grow Group tumbling on the New York Stock Exchange. After a trading halt, it fell 30% within minutes of reopening and closed down $4 at $11.75 a share. The stock has risen strongly this year, climbing from a low of $6.25.
The chemical leak was probably a contributing factor but not the only reason for the decision to cancel the deal, Wall Street arbitragers said.
In a statement, the company said it is "presently reviewing all aspects of the situation in California but does not believe that this event will have a material adverse effect on its financial position."
The first weekend accident at the plant occurred just after midnight Saturday when 2,000 pounds of smoldering chemicals in large drums released a toxic cloud that blanketed a half-mile area. Nearby residents were evacuated for up to 12 hours. On Sunday, at about 5:20 a.m., another barrel of the same chlorine compound began to vaporize and drift over an area of nearby Montebello. About 1,000 residents were evacuated for more than an hour.
The leaks were the second and third within the past month at the plant, which makes chlorine tablets for swimming pools. Air quality officials cited the plant for creating a public nuisance, although health officials said they saw no long-term effects or health risks from the leak.
"The company is fully cooperating with all governmental and regulatory agencies," said Russell Banks, president and chief executive of Grow Group, said in the statement. "We are continuing our strong commitment to ensure that all safety measures have been taken for the protection of our employees and the surrounding community."
Grow Group said it was disappointed by PPG's announcement but added that it will meet with its financial adviser, Drexel Burnham Lambert, to plan a program to maximize shareholder value. It declined to elaborate and would not comment on whether it might seek another buyer.
PPG agreed Aug. 19 to purchase Grow Group, which has annual sales of about $380 million, for $16.625 a share. The $300-million price tag included Grow Group's debt, which would have been assumed by PPG.
PPG, formerly Pittsburgh Plate Glass and based in Pittsburgh, is one of the world's biggest producers of glass and related products. It had sales of $5.2 billion in 1987. Its trade-paints business has sales of about $150 million to $200 million, according to analysts, about the same size as Grow Group's. Industry analysts said when the deal was made that the acquisition would help PPG's lagging trade-paints business.
On Friday, Grow reported an operating loss of $695,000 for the quarter ended June 30, contrasted with a profit of $798,000 for the same period last year.