Wynn's International Inc., a supplier of automotive gaskets, sealing products and specialty chemicals headquartered in Orange, is being acquired by a Cleveland conglomerate for $438 million in cash.
Parker Hannifin Corp., which manufactures industrial sealing products and is involved in other manufacturing operations, said Tuesday it will pay $23 a share, nearly 72% higher than the stock's closing price.
Parker Hannifin, which has been on a buying spree, also agreed to assume $59 million in Wynn's debt. The deal is expected to close in July.
"We think our stock has been undervalued and that this represents a great opportunity for Wynn's shareholders," Wynn's Chief Executive James Carroll said.
Carroll expects he will step down as chief executive after completion of the deal but has agreed to stay on for two years as a consultant to Parker Hannifin. He stands to walk away from the deal nearly $26.6 million richer from his stock holdings, according to Wynn's corporate documents.
Parker Hannifin wanted Wynn's in large measure for its sealing business, which complements Parker Hannifin's industrial sealing operations, Carroll said.
However, Wynn's oil division, which now accounts for about one-third of the company's sales, is outside Parker Hannifin's core operations. Parker Hannifin has yet to decide what it will do with the division, which employs 532 people in Azusa, Carroll said.
No major layoffs are expected at Wynn's, which employs 5,000 worldwide.
"There hasn't been a lot of talk about restructuring or reorganizing," Carroll said. "I don't think there's going to be massive changes."
Wynn's headquarters, which have 13 employees, will likely be shuttered after the deal is completed, said Sy Schlosser, Wynn's chief financial officer.
In fueling its growth through an ambitious acquisition strategy, the company has snapped up 45 businesses over the last six years.
Parker Hannifin has been able to digest most of the acquisitions smoothly, said Goldman Sachs analyst Joanna Shatney. But she expressed concerns about the addition of Wynn's oil division. "It's not a clear fit," she said.
Parker Hannifin has a 40-acre campus in Irvine for its aerospace headquarters. The company recently put the land on the market to determine its value, the company said. It is unclear how the Wynn's deal will affect the property's future.
Last year, Wynn's earned nearly $28 million on sales of $360.3 million. Parker Hannifin posted earnings of $310.5 million on sales of $4.96 billion in its fiscal year ended last June.
Wynn's was founded in 1939 by Carl E. Wynn as a maker of additives for automobile engines. Today it has 1,000 customers worldwide.
This isn't Wynn's first experience with takeovers. In September 1987, Security Pacific Venture Capital offered $106 million, or $27.25 a share, for the company. The offer was rescinded in the aftermath of the October 1987 stock market crash. Wynn's investment banker produced two additional suitors, but a deal was never concluded.
Wynn's shares closed Tuesday at $13.38, off 25 cents, in New York Stock Exchange trading. Parker Hannifin shares closed at $40.50, down 78 cents, also in NYSE trading.
The announcement was made after the close of U.S. markets.
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At a Glance
Wynn's International Inc.
CEO: James Carroll
1999 sales: $360.3 million
1999 profit: $27.8 million
Employees: 5,000; Orange County, 13
Business: Makes seals and industrial lubricants for use in cars, planes and ships
Stock price: $13.38, off 25 cents
Market: New York Stock Exchange
Parker Hannifin Corp.
CEO: Duane E. Collins
1999 revenue: $4.96 billion
1999 profit: $310.5 million
Business: Conglomerate, includes manufacturing hydraulic equipment
Stock price: $40.50, off 78 cents
Market: New York Stock Exchange
Source: Bloomberg News