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SPX launches Echlin bid
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February 17, 1998: 5:54 p.m. ET
Smaller firm offers to acquire larger rival for $48/share in cash, stock
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NEW YORK (CNNfn) - Auto parts manufacturer SPX Corp. unveiled a hostile $3 billion takeover bid for its larger rival Echlin Inc.
The company said the $48 cash-and-stock offer consists of $12 in cash and 0.4796 SPX shares for each Echlin share. The offer represents a 23 percent premium to Friday's closing stock price.
Muskegon, Mich.-based SPX, which has about $1 billion in annual revenue, already owns 1.15 million Echlin shares, or about 1.8 percent of its total shares outstanding.
Branford, Conn.-based Echlin, which has more than $3.5 billion in 1997 revenue said its directors will review SPX Corp.'s unsolicited takeover offer.
"To that end, Echlin has retained Salomon Smith Barney and Davis, Polk & Wardwell to assist in its review of the proposal," the company said in a statement.
Echlin advised its shareholders to wait for a recommendation from its board.
Echlin previously rejected an offer from SPX for two main reasons, the company said. One is "lack of market synergies" and the other is "significantly different views" of the future of the auto parts business, Echlin said.
SPX Chairman John Blystone said he believes Echlin offers a good fit with SPX.
(133K WAV) or (133K AIFF)
The company has an anti-takeover poison pill provision, which triggers when an unauthorized shareholder purchases more than 20 percent of its stock.
In a statement, SPX said it will file a registration statement on Tuesday with the Securities and Exchange Commission and will start its exchange offer as soon as its filing is cleared. SPX said it received antitrust clearance for the transaction on Feb. 5.
SPX said it is filing preliminary materials with the SEC to solicit shareholder demands to call a special meeting to replace Echlin's entire Board with SPX's nominees. Echlin does not have a staggered board.
Because Echlin is incorporated in Connecticut, the state's law dictates the company must give notice of a special meeting within 30 days of receiving demands by investors holding at least 35 percent of its outstanding shares. It must also hold the meeting within 60 days of giving notice, according to SPX.
If SPX is successful, the company said it plans to restructure or divest Echlin assets that it thinks are underperforming. The move is expected to result in 3,000 layoffs -- or 10 percent of Echlin's workforce.
(178K WAV) or (178K AIFF)
SPX expects the acquisition to contribute to earnings per share in the first full year after closing. SPX expects to achieve cost savings of at least $125 million in the first full year after closing, increasing to $175 million in the second year and thereafter.
SPX also said it has received a "highly confident" letter from Canadian Imperial Bank of Commerce and its affiliate, CIBC Oppenheimer Corp., to finance the cash portion of the offer, refinance existing debt and provide working capital.
Shares of Echlin Inc. (ECH) surged 11 points to 49-7/8. SPX Corp. fell 13/16 to 74-1/4 (SPW). 
From staff and wire reports
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