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Echlin hikes verbal defense
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March 31, 1998: 1:52 p.m. ET
Auto parts maker paints upbeat profit picture, denounces SPX takeover bid
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NEW YORK (CNNfn) - With a hostile suitor lurking, Echlin Inc. boosted its earnings outlook and said its board still doesn't see any positive signs in the $3 billion takeover bid by smaller automotive tools maker SPX Corp.
Stepping up its defensive effort, Echlin said it has upped its earnings forecast for this year to $2.40-$2.50 a share. Analysts have expected $2.28 a share, according to First Call.
But investors took the news coolly. Echlin shares (ECH) climbed ¼ to 52 in New York Stock Exchange trading late Tuesday morning. SPX shares (SPW) were off 1/16 at 76 ¼.
Echlin's move marks its latest defensive maneuver in what has been a heated battle for Echlin, a Brantford, Conn., auto parts maker with annual sales of $3.6 billion. The bid was announced Feb. 14.
Echlin executives, who saw plans to have the Connecticut legislature adopt an anti-takeover law get shot down, now face a slugfest with SPX to stave off the bid.
And they're taking to textbook defense tactics, at least verbally, such as insisting that Echlin shareholders will get short shrift if the SPX deal goes ahead.
"It appears there are very few synergies between Echlin's operations and SPX's, and that the resultant cost savings of a combination would be considerably less than those SPX currently estimates," said Larry McCurdy, Echlin chairman, president and chief executive officer, in a statement.
"SPX does not appear to understand Echlin's business," said McCurdy. "And a combination of our two companies, along the lines SPX spelled out in its new distribution concept, would be extremely destructive to our long-term relationships with customers."
SPX said it's time for shareholders to have their say about the Echlin's direction.
"After failing to change Connecticut law, Echlin is now belatedly attempting to make an economic case to its shareholders," said Anna Cordasco, a spokeswoman for Muskegon, Mich.-based SPX.
"So we trust they will take no further steps to disenfranchise the shareholders," she said.
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