Trace International Holdings Co. is buying full ownership of polyurethane foam producer Foamex International Inc., but the deal isn't expected to result in any operational changes at Foamex.
Directors of the Linwood, Pa.-based firm agreed to sell their Foamex shares to Trace — a New York company that is the principal shareholder in Foamex — for an estimated $279 million.
Foamex will become a wholly owned subsidiary of Trace, a Foamex spokeswoman said.
Pending the approval of Foamex shareholders and the Securities and Exchange Commission, the purchase could be completed by September, she said. Under the agreement, Foamex will retain its name. No facility or personnel changes have been announced.
Each Foamex shareholder, other than Trace and its subsidiaries, will receive $18.75 in cash per share. The price reflects a 10.3 percent increase over Trace's original unsolicited bid of $17 per share and a 35 percent premium over the closing stock price of $13.88 on March 13 — the last day of trading before Trace's offer March 16.
According to Foamex, company directors accepted the buyout on the recommendation of a two-man special committee, consisting of Foamex directors John H. Gutfreund, president of Gutfreund and Co. Inc., and Robert J. Hay, Foamex LP chairman emeritus.
Gutfreund and Hay reviewed the deal with banking adviser Beacon Group Capital Services LLC and legal counsel Cleary, Gottlieb, Steen & Hamilton, Foamex said.
Trace, which owns about 11.5 million shares (46 percent) of Foamex common stock, may arrange financing for the deal through Donaldson, Lufkin & Jenrette Securities Corp. and the Bank of Nova Scotia/Scotia Capital Markets. Trace will consider those arrangements during the 30-day waiting period required by federal antitrust law.
Trace International has holdings in a number of industries, including auto sales, foam, textiles and window treatment businesses.
Foamex operates under four business units: automotive, technical, carpet cushion and foam products. The latter unit includes consumer goods, furniture and bedding materials.
Foamex has more than 5,000 employees, 140 global sales agents and more than 50 manufacturing and warehousing sites in the United States, Mexico and Asia.
No 1998 projections were offered this early in the merger process, but Foamex reported 1997 sales of about $931 million, the Foamex spokeswoman said. Including Foamex's December acquisition of St. Louis-based PU foam producer Crain Industries, total 1997 sales approached $1 billion, she said.