Heywood Williams Group plc confirmed it has received a bid for the company for 3 ($4.74) per share, but said the offer is much too low. The Huddersfield, England-based building products company is parent to Bristolpipe Corp., a major U.S. pipe manufacturer. Some financial analysts predict that if a sale goes through, Heywood might sell the U.S. operations.
Heywood Williams recently was approached by two private equity firms interested in the company, according to a report in the Financial Times in London.
Though Heywood would not confirm where the offer originated, a statement released April 25 said the company was in preliminary talks about a sale.
However, based on a 21.6 percent increase in earnings per share in 1999 and the outlook for 2000, Heywood said the offer undervalues the company.
"The board considers that the level of the offer implied by this very preliminary approach undervalues the group and its prospects very significantly and does not intend to pursue discussion ... at such a low level," the statement said.
Heywood stock closed April 26 at 2.52 ($3.97) per share, still lower than the 3 offered, which would make the firm worth 248 million ($391 million).
In the past few years, Heywood has sought to build its PVC pipe business in the United States and expand its PVC window and door businesses in the United Kingdom.
Bristol, Ind.-based subsidiary Bristolpipe, which extrudes PVC, ABS and chlorinated PVC pipe, expanded into the southern United States in 1997 when it acquired Columbia Plastics Inc. of Columbia, Tenn., and again in 1999 when it bought Pioneer International Inc. of Greensboro, Ga.
But if the parent company were sold to a venture capitalist group, the U.S. businesses probably would be the first to go, analyst Kevin Cammack with Merrill Lynch Global Securities in London predicted.
"If a venture capital presses ahead, it's almost certain they would seek to split the business in two, U.S. and U.K.," he added. "It's possible they could sell the businesses in the U.S. over the course of the next two to three years."
Though the U.S. pipe business has been highly profitable during the past several years, "on paper, it probably hasn't done anything for the stock," Cammack said, because the building products business is viewed in Britain as a low-return investment.
A venture capital group's first concern would be to repay the debt as fast as possible. Such action might lead to selling the U.S. businesses or consolidation throughout the company, said analyst Steve Charnock of Charterhouse Tilney Securities in London.
Acquisition of other vinyl building materials companies would be another option to build shareholder value, Charnock said.
