DETROIT - New York investment bankers led by former Reagan administration budget chief David Stockman are negotiating a buyout of American Axle & Manufacturing Inc., a key General Motors supplier.
Stockman has made the offer, estimated at more than $800 million, on behalf of the New York-based Blackstone Group, of which he is managing director, investment bankers said.
The offer for the Detroit-based supplier could reach $1 billion. The company's owners are believed to have paid less than $100 million for the five former GM gear and axle plants that became American Axle in 1994.
The Blackstone buyout package is designed to cash out American Axle's owners, primarily Ray Park, a 71-year-old Cleveland industrialist, the bankers say. He owns a majority stake in the automotive driveline maker, which posted sales of $2.2 billion last year.
The company is 17th on the Automotive News list of original-equipment suppliers in North America. The buyout plan was reported by Crain's Detroit Business, a sister publication to Automotive News.
HUGE GM CONTRACT
Blackstone's equity investment also is expected to help American Axle proceed with its anticipated $500 million investment in its Detroit operations where it employs 5,000. The company won the contract to supply axles to the next generation of GM full-sized pickups and sport-utilities, beginning next spring.
A New York automotive analyst said Blackstone can provide the massive capital investment for the contract, which calls for an estimated 1.2 million vehicles annually.
Stockman, senior managing director for Blackstone, declined comment through an assistant. Park, chairman and CEO of Park Corp., denied in a brief interview that he was negotiating an exit from the company he helped found in March 1994.
Richard E. Dauch, American Axle's president and CEO, did not return calls. The former Chrysler Corp. manufacturing chief who led the turnaround at the GM spinoffs is expected to stay on for the remainder of his 10-year contact, which expires in 2004.
Investment bankers say Park this year decided to leave American Axle. He operates a privately held, diversified industrial company of 11,000 employees; last year it posted sales of $225 million, according to the Dun & Bradstreet Million Dollar Directory.
PARK: BUYER, BUILDER
'He starts things up, he turns them around, makes the sale and then goes someplace else and does it again. It's magical,' Phyllis Arnold, a West Virginia bank vice president, was quoted as saying in a 1989 story in the Charleston (W.Va.) Daily Mail.
Park rescued the idle Volkswagen stamping plant in South Charleston, W.Va., in 1987. He sold the assets two years later to private investors, according to the Daily Mail.
He retained the land and buildings.
Park provided most of the cash to acquire American Axle, along with Detroit-area investor Morton Harris and Dauch, according to an investment banker. American Axle began its turnaround immediately - posting a profit during its first month of new leadership, according to a source familiar with the deal.
Park said the company last year retained Merrill Lynch Co.'s Dan Dickinson, director of mergers and acquisitions. American Axle's owners considered selling part of the company through an initial public offering this year, Park confirmed.
Blackstone, a relative newcomer to automotive industry acquisitions, is a part owner of Collins & Aikman Corp., a trim supplier.
As American Axle is a core supplier to GM, any deal would be scrutinized by the automaker. Mark Tanner, GM manager of corporate media relations, declined comment.