Hayes Lemmerz International Inc., the world's largest maker of auto wheels, is looking to end its seven-year run as a public company, its principal owners apparently disappointed by Wall Street's distaste for auto-supplier stocks.
A group of investors who own 77.6 percent of Hayes, led by the New York-based leveraged buyout fund Joseph Littlejohn & Levy Inc., have made a $131 million offer to buy the remaining shares it doesn't own.
If successful, the move effectively would take Hayes private, which analysts said could make it easier for Littlejohn & Levy to leave Hayes through a sale or another public stock offering later.
The $21-a-share bid was made public earlier this month. The stock had been trading at about $17.75 at the time of the offer, and gained about $3 a share during the next two weeks.
The offer has prompted one shareholder lawsuit in Delaware and threats of more, according to a source close to the company.
Like stock of other auto suppliers, Hayes stock has slumped. Before the buyout offer, Hayes stock traded at 9.93 times its estimated 2000 profit, while the Standard & Poor's 500 Index trades at about 30 times its estimated profit. This profit-to-earnings ratio is a guide to how valuable investors consider a stock. In 1998, Hayes stock traded at about $40 a share. One year ago it traded at $30.25, then got to $33 on May 28, but has dropped steadily since. Its low last year was $15.13 on Dec. 15. Hayes, with annual sales at $2 billion, went public in December 1992.
Hayes' stock slide quickened in November when it announced third-quarter net income of $19.9 million, or 63 cents a share, below analysts' forecasts of 75 cents a share.
'A lot of automotive companies, particularly auto suppliers, are really undervalued by the market. Their stock prices have been beaten up by Wall Street,' said Robert Athari, assistant vice president of investment banking for First Union Securities Inc.
'You can't fault Littlejohn & Levy. Their company (Hayes) has been undervalued for more than one year for no reason other than it's a supplier.'
Reasons for investor disinterest in auto suppliers range from fear that car sales will slow to a simple preference for high-tech stocks. Hayes also is weighed down by its $1.6 billion debt.
Littlejohn & Levy, which individually owns 35 percent, or about 9.5 million shares, in Hayes, bought into Hayes Wheels International Inc. in July 1996, bringing in groups like Cleveland-based TSG Capital Fund II LP and CIBC WG Argosy Merchant Fund of New York.
In buying up the majority of Hayes, that group gave shareholders $28.80 a share, plus allowing them to retain one Hayes share for every 10 they owned.
Several analysts said the company didn't get the money it desired for Hayes stock and may want to take it private to 'clean it up' without public scrutiny, and then try to turn around and sell it.
Another option would be to bring Hayes back to the public market when Wall Street is more hospitable to auto-supplier stocks.
'One of the advantages of going private is that you create better value by exiting it down the road, either with a sale or an IPO (initial public offering),' said Athari, who expects more mid-sized auto suppliers to go private.
Representatives of Hayes and Littlejohn's group declined to comment on the buyout offer.