Automotive plastics supplier Newcor Inc. is pondering an unsolicited purchase bid from a Las Vegas company that already holds a 14 percent stake in the business. EXX Inc. announced April 28 it would offer $4 per share for Bloomfield Hills, Mich.-based Newcor. The stock closed at $2.75 per share on the American Stock Exchange May 4.
In a written response, Newcor officials "urged shareholders to take no action until the proposed unsolicited offer is reviewed."
Newcor, in a May 4 press release, pointed out a potential monkey wrench in EXX's proposal, claiming EXX would have to refinance Newcor's major credit line and buy back $125 million in notes if the deal went through. The Newcor release said EXX's offer is only good if the notes would not become immediately due.
EXX is the smaller firm, a holding company involved in the design, production and sale of watches, kites, electric motors and cable pressurization equipment. It had net sales of $21.2 million last year. Its stock is valued at a little less than $1 per share.
Neither Newcor nor EXX had any comment beyond written news releases.
The offer is just the latest action to hit Newcor this year, which suffered from a downgrade in its credit ratings in January, more than $11 million in losses last year and health problems that forced longtime company boss Keith Hale to step down from his posts.
Hale, president, chief executive officer and director, resigned earlier this year because of continuing problems since undergoing surgery in 1999, according to the company. Newcor named James J. Connor interim president and CEO in April.
The company may have to take action soon, whether through a sale or divesting a division, analysts said.
"There is a lot of pressure on Newcor from a lot of different factions," said David Eberly, managing director of GMA Capital LLC of Farmington Hills, Mich.
Newcor had $285.5 million in total sales in 1999, but posted an $11.6 million net loss. For the first quarter of 2000, it had net sales of $69.1 million and a loss of $117,000.
Newcor's rubber and plastics division molds interior automotive components including gear-shift boots, steering columns, air-conditioning ducts and under-the-hood elements such as brackets.
The unit, which includes operations in Deckerville, Mich., and East Troy, Wis., accounted for 19 percent of Newcor's sales in 1999, most of it to the auto industry, according to the company's annual report.
New York-based Moody's Investors Service lowered Newcor's ratings in January, blaming concerns regarding its high debt, "marginal" cash flow and a decline in operating performance, with poor financial performance due to higher-than-expected scrap rates and "labor inefficiencies" in its Precision Machine Products Group.
Shareholders at Newcor's annual meeting May 3 in Troy, Mich., re-elected three directors to their posts for three-year terms: James D. Cirar, Jack R. Lousma and Richard A. Smith.