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Echlin parts with SPX
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May 4, 1998: 10:05 a.m. ET
Auto parts maker accepts $4.2B buyout bid from 'white knight' Dana
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NEW YORK (CNNfn) - Auto-parts maker Echlin Inc. said Monday it has agreed to be acquired by Dana Corp. for $4.2 billion in stock and debt assumption, dashing the hostile takeover hopes of rival bidder SPX Corp., which had offered to pay $3 billion.
The Dana deal, based on a valuation of $55 per Echlin share, would create an auto parts colossus with $13 billion in annual sales and a total equity market of $10 billion.
Shares of Echlin (ECH) jumped more than $5 to 52-3/4 in pre-open trade Monday from a Friday close of 47-9/16. Dana (DCN) stock ended up 1/16 Friday at 59-3/16 on the New York Stock Exchange.
Under the proposed transaction, Ohio-based Dana is expected to issue $3.6 billion in common shares for Echlin and assume $570 million debt. Echlin stockholders will receive 0.9293 Dana share for each Echlin share.
Dana said it anticipates full integration of the merger by 2000, along with cost savings of about $200 million.
Welded together, Echlin and Dana would become a formidable industry supplier to professional mechanics and vehicle owners in the so-called "aftermarket" for car components.
Branford, Conn.-based Echlin's traditional strength lies in its engine parts group, a manufacturer of distributors and caps, ignition coils, fuel pumps and condensers. Dana, which counts Ford and Chrysler among its principal customers, specializes in axles, driveshafts, filters and piston rings. The company also operates manufacturing, assembly and distribution facilities in nearly 30 countries.
$10 billion in sales before 2000?
Southwood Morcott, Dana's chairman and chief executive officer, said the acquisition would allow his company to speed up the diversification of its product lines and achieve $10 billion annual sales ahead of a year-2000 schedule. Dana reported sales of $8.3 billion in 1997; Echlin posted annual sales of $3.5 billion.
Morcott noted that Dana also will acquire Echlin's $1 billion brake and engine-fluid business as part of the deal. "By the end of the year," he added, "the combined company is expected to have debt-to-total-capital of less than 40 percent."
After the merger, Larry McCurdy, Echlin's chairman, president and chief executive officer, will become president of the Echlin Strategic Business unit of Dana, which will run Dana's aftermarket activities.
Echlin shareholders are expected to receive an annual dividend of $1.08 per share, compared with a current annualized dividend of 90 cents. The merger is subject to shareholder and regulatory approval. The companies said they hope to close the merger in the third quarter.
Echlin had been fighting to fend off SPX Corp.'s bid, at one point calling it "frivolous". At the time of its hostile offer in early April, SPX owned 1.15 million shares, or 1.8 percent, of Echlin.
SPX hinted Monday that it may yet counter with a sweetened takeover bid. After Echlin announced its agreement with Dana, SPX responded that it was "evaluating" the situation.
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Echlin
Dana Corp.
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