Officials of Husky Injection Molding Systems Ltd. have hired Citigroup Global Markets to conduct a review that could lead to a sale of part or all of the machinery maker's shares ``or a strategic combination'' with another firm.
The review was prompted by a decision by Husky's founder and largest shareholder, Robert Schad, to consider selling his shares, the company said. Schad said Husky's current market valuation does not reflect its strong competitive position in machinery.
Schad also is Husky's chairman of the board. His wife, Elizabeth, also serves on the board.
Schad, 78, said he wants to play an active role in deciding who would buy Husky. ``I want to be involved,'' he said in a March 9 telephone interview. ``I've done this for 55 years and I don't want to throw it to the vultures.''
Nothing may end up happening. Husky's news release used formal language: ``There is no assurance that this review will result in any specific strategic or financial transaction.''
Schad put it more bluntly: ``Nothing may happen. If it goes the wrong way, nothing will happen.''
The firm ``has been approached several times over the last two years'' by interested buyers, he said, declining to give details.
Husky expects to reach a decision this calendar year, said John Galt, president and chief executive officer. The company's fiscal year ends July 31.
``I'm concerned to have the right home for Husky,'' Schad said. ``It's very important to me. And I'm working very closely with John on this. I don't expect any management changes. It will be business as usual after this is over.''
Galt addressed the issue in a March 8 conference call to discuss Husky's second-quarter financial results. ``Robert decided that it is his right time to consider a sale of his shares,'' Galt said.
``It's a good time for Robert,'' Galt said, answering an analyst's question about the timing of the review. Galt said Schad, an environmental activist, wants to make sure he has time to use the money for his charitable causes. Schad also wants to make sure he is fully engaged in any deal, Galt said.
Schad directly or indirectly owns nearly 41 percent of the firm's shares. He also exercises voting control, with no beneficial interest, in shares representing an additional 3.47 percent, according to Husky's Dec. 7 proxy.
Galt said he and the board fully support the review. ``Husky has reached an important point in its evolution. At this point it makes sense for us to consider Husky's future, and to do so on the basis of a strong position in the market,'' Galt said in the news release.
Shares of the Bolton, Ontario-based maker of injection molding machines, robots, PET preform molds and hot runners shot up 27 percent on the news, to close March 8 at C$7.50 (US$6.37) on the Toronto Stock Exchange.
Husky generated US$935.3 million in 2006 sales.
Schad founded Husky in 1953, and took it public in 1998. He retired in 2005 and has been devoting more time to charity work through his Schad Foundation. He has an office at the headquarters of Earth Rangers in Woodbridge, Ontario, near Husky's headquarters.
Schad regularly has sold shares of Husky to donate money to charity, including environmental causes like Earth Rangers, aimed at young people.
In the news release, Schad said: ``Over the past decade, we [at Husky] have made substantial investments to develop our leading technology platform, expand our markets and distribution network, improve our operations and build a strong management team. While Husky's competitive position has become stronger as a result, we do not believe that this position is reflected in our current market valuation.''
In other news, Husky announced it will lay off 85 from its Bolton headquarters plant. Galt said it is ``increasingly inefficient'' to manufacture products in Canada for shipment around the world. He said company officials have expressed concerns to the Canadian government about the high Canadian dollar and ineffective research and development tax structures.
Husky has been investing in its plant in China, and its overseas business continues to grow. Companywide, sales and orders are strong.
But it's another story for Husky's home region, which is served by the Bolton factory, Galt said.
``The North American market for all suppliers of injection molding equipment has been difficult, particularly around the restructuring in the automotive market,'' he told financial analysts.
Now the question turns to the type of buyers that could emerge. The cash-rich private-equity sector appears to be most likely, based on major deals in the past 12 months. Private-equity firms have purchased Mannesmann Plastics Machinery GmbH - including the brands of Krauss-Maffei, Demag Plastics Group, Netstal and Berstorff; the Battenfeld injection press business; and most recently, a deal for makers of extruders under the American Maplan, Battenfeld and Cincinnati Extrusion brand names.
Private equity also helped finance a deal with management to buy Davis-Standard LLC.