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News
January 10, 2000 01:00 AM

Las Vegas holding firm buys shares of struggling Newcor

Jeffrey McCracken CRAIN'S DETROIT BUSINESS
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    DETROIT — A Las Vegas toy and electronics manufacturer has been snapping up the stock of struggling Bloomfield Hills, Mich., auto-supplier Newcor Inc. with a potential hostile takeover in mind. Exx Inc., a holding company that makes items such as kites and watches, has during the past two months acquired 13.25 percent of Newcor's stock, or approximately 652,200 shares. David Segal, Exx's chairman and chief executive officer, has acquired an additional 24,000 Newcor shares.

    In response, Newcor's board of directors Tuesday passed a shareholder-rights plan that kicks in if a person or group obtains 10 percent of Newcor's stock and the board decides that person or group "is seeking short-term financial gain which would not serve the long-term interests of the company."

    Jerry Marks, a research associate with Raymond James Financial Inc. in Detroit, said that when a company's shares drop substantially a company often passes a shareholder-rights plan to guard against a takeover or to protect shareholder interest in the stock.

    Segal, Newcor CEO Keith Hale and other members of Newcor's board and management team did not return telephone calls.

    Newcor, a maker of rubber and plastic parts and custom machines for the auto and agricultural industries, has seen its stock dive during the last two years as the company has struggled to post a profit. Its largest customers are local auto suppliers such as American Axle & Manufacturing Inc. and Detroit Diesel Corp.

    Newcor's stock dropped to $1.44 a share on Oct. 19, the lowest since it went public in July 1980.

    On Oct. 18, Exx began snapping up Newcor shares, buying 50,000 shares at $1.50 each. It bought another 250,000 on Oct. 19 and 272,000 shares on Oct. 20, according to Exx's Schedule 13D filing with the Securities and Exchange Commission. Segal bought his 24,000 shares between Oct. 13 and 18.

    In that same form, Exx said it intends to use its Newcor stock to "participate in a turnaround of Newcor's recent financial performance," either by working with current management or by "seeking to obtain control of Newcor."

    Exx said in the filing that it invests in or buys underperforming or distressed businesses. Exx also sells electric motors and cable pressurization equipment for the telecommunications industry.

    After its mid-October Newcor stock binge, Exx continued to buy Newcor stock, but in smaller chunks. For example, it bought 1,600 shares on Oct. 25, 2,000 shares on Dec. 7 and 900 shares on Dec. 16.

    Since bottoming out in mid-October, Newcor stock has risen slightly. It rose to $3.13 on Nov. 8 and closed Wednesday at $2.75.

    Newcor has annual sales of about $240 million, but lost $1.15 million in 1998. Hale, who took over as Newcor CEO in November 1998, predicted the firm would return to profitability in 1999. Instead, it is on pace for another money-losing year. It lost $3.1 million in the third quarter and has lost $2 million for the year.

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