Investors are taking a close look at Cambridge Industries Inc. as the automotive supplier plans to complete a sale of either a division or the entire company by early spring. The Madison Heights, Mich.-based company announced Feb. 14 it has placed itself on the market, facing "short-term liquidity problems" and a need for a cash infusion.
"We've been busy talking to potential buyers," said John Sieg, vice president of marketing and communications, during a Feb. 17 telephone interview. "We've had a string [of potential buyers] going through all this week. It'll probably continue into next week."
The company is likely to continue meeting with prospective buyers through the rest of this month and pare down the contenders in March, said Don Campion, chief financial officer. Cambridge has enough liquidity to stave off any potential bankruptcy proceeding for now, he said, but that could prove more difficult if the sale takes too long.
Cambridge posted $487 million in sales in 1998. It listed $16 million in losses through the first nine months of 1999. The company has not released final sales figures yet for last year.
Cambridge anticipates more than $250 million in sales just to General Motors Corp. — largely the result of new work making composite pickup-truck boxes — but that will come from projects that have not started production, Sieg said.
"To satisfy this dramatic increase in our business, the company needs significant funding to pay for new equipment and facilities," Cambridge Chairman Richard Crawford said in a news release.
"After reviewing various financing alternatives, we have decided that the best way to meet the company's funding requirements, while protecting the needs of our customers, is to find buyers for some of our ongoing operations, or if the right opportunity presents itself, the entire business," Crawford said.
Cambridge hired Morgan Stanley Dean Witter & Co. to manage the sale. Sieg said the business hopes to have a deal in hand by early in the second quarter of the year.
Potential buyers looking at purchasing only one division have split the business into three units: light vehicle exteriors, light vehicle interiors and heavy trucks.
"There are people interested in the individual pieces and people interested in all three," Sieg said.
Cambridge has had contacts from competitors, holding companies and a variety of other investors, he said.
"They're all responding positively to the growth potential in the industry and our ability to meet that growth," he said.
Cambridge has 4,700 employees at 18 factories. A layoff of 70 workers last week at its Centralia, Ill., heavy truck plant was not connected to the pending sale, Sieg said. The business had planned the reduction because of a decrease in orders.
Cambridge is one of two major auto suppliers in the Detroit area reported to be seeking some kind of a sale or cash infusion. Novi, Mich.-based Key Plastics LLC faced a Feb. 15 deadline to bring more money into its operation, to help offset $428 million in debts listed at the end of September.
On Feb. 9, Key filed a report with the SEC noting its majority member, Key Plastics Holdings Inc., had until March 1 "to contribute $5 million to the registrant if the registrant is unable to borrow under its senior credit facility."
Key Holdings already came up with $4 million as required by Dec. 20.
Key executives have not commented.
Market analysts with Standard & Poor's lowered Key's credit rating Feb. 1 to a CCC-plus from B, a two-step decrease, because of the debt. The New York credit company stated that Key has "an identifiable risk of default" on its loans.