 |
Detroit Diesel - OMC |
 |
|
Detroit Diesel - OMC |
|
July 9, 1997: Roger Penske's Detroit Diesel has made an offer for OMC. We had him listed on our site as a potential suitor since the day after OMC announced their situation. We are posting coverage of the purchase below.
Detroit Diesel Corporation Tender Offer Terminated Detroit Diesel Press Release 12 September 1997
Detroit Diesel Offers to Buy
Faltering Outboard Marine
Dow Jones Newswires Wall Street Journal On-line Edition 9 July 1997DETROIT -- Detroit Diesel Corp. Wednesday agreed to acquire Outboard Marine Corp. in a cash and stock deal that values the faltering marine-engine and boat maker at about $323 million.
Detroit Diesel said it will make a cash tender offer for 67% of Outboard Marine's common stock at $16 a share.
In a second step, Detroit Diesel will buy the remaining shares for a combination of cash and 4 million Detroit Diesel common shares. The second step also values Outboard Marine's common stock at $16 a share.
The offer is $3.50 lower than Outboard Marine's Tuesday closing price of $19.50 price. At the opening of composite trading on the New York Stock Exchange Wednesday, the stock tumbled to trade just below $16. Detroit Diesel was up $2.25 to $26.
The Detroit-based company said it will assumeOutboard Marine's $180 million of debt as part of the deal. Detroit Diesel said it plans to finance the acquisition through a new credit facility, and expects to complete the acquisition within 90 days.
Detroit Diesel said it hopes the acquisition will expand its worldwide marine capabilities beyond diesel engines. Outboard Marine makes and markets marine engines, boats and related products.
Detroit Diesel designs, manufactures, sells and services heavy-duty diesel and alternative fuel engines, automotive diesel engines, and engine-related products, as well as providing financing.
In April, Outboard Marine reported a fiscal second-quarter loss of $7.3 million, or 36 cents a share, compared with earnings of $1.1 million, or five cents a share, in the year-earlier period. Sales for the quarter ended March 31 fell 17%, to $237 million from $285.5 million, as demand for its recreational products slipped worldwide.
The quarterly loss, which followed a $14.3 million loss in the fiscal first quarter, would have been larger but for asset sales and other factors that contributed $8.8 million in nonoperating income.
Faced with mounting losses and a need for more capital, the Waukegan, Ill., company omitted its quarterly dividend and disclosed that its investment banker was exploring strategic options for the company.
Copyright © 1997 Dow Jones & Company, Inc.
Detroit Diesel In Pact To Acquire Outboard Marine
AP-Dow Jones News Service 9 July 1997DETROIT -- Detroit Diesel Corp. (DDC) reached an agreement to acquire Outboard Marine Corp. (OM) for $500 million in cash and stock.
In a press release Wednesday, Detroit Diesel said it will make a cash tender offer for 67% of Outboard Marine's common stock at $16 a share. In a second step, Detroit Diesel will buy the remaining shares for a combination of cash and 4 million Detroit Diesel common shares.
The second step also values Outboard Marine's common stock at $16 a share.
Detroit Diesel said it will assume Outboard Marine's $180 million of debt as part of the deal.
Detroit Diesel said it plans to finance the acquisition through a new credit facility, and expects to complete the acquisition within 90 days.
According to Detroit Diesel, the objective of the acquisition is to expand its worldwide marine capabilities beyond diesel engines.
Outboard Marine makes and markets marine engines, boats and related products.
Shares of Outboard Marine closed Tuesday at 19 1/2. Shares of Detroit Diesel closed Tuesday at 23 3/4.
Detroit Diesel designs, manufactures, sells and services heavy-duty diesel and alternative fuel engines, automotive diesel engines, and engine-related products, as well as providing financing.
Copyright © 1997 Dow Jones & Company, Inc.
CNNfn 9 July 1997NEW YORK (CNNfn) - Detroit Diesel Corp. said Wednesday it agreed to acquire Outboard Marine Corp for $500 million, plus the assumption of $180 million in debt.
Detroit Diesel, which makes and sells various engine products, is controlled by auto-racing legend Roger Penske. Outboard Marine is the world's leading maker of outboard motors.
Combined, the two companies would have had 1996 revenues of $3.2 billion.
"Our objective is to further expand our worldwide marine capabilities beyond diesel engines with the OMC [Outboard Marine] enterprises," Penske, Detroit Diesel's chairman, said in a statement.
The transaction will be structured in two phases, with Detroit Diesel first launching a cash tender offer of $16 per share for 67 percent of Outboard Marine's outstanding shares and purchasing the remainder for a combination of cash and 4 million common shares.
Detroit Diesel said the acquisition will be financed through an equity offering and as well as a newly established credit facility.
Copyright © 1997 Cable News Network, Inc.
Chase and Penske Team Up to Acquire Industrial Business
Wall Street Journal 10 June 1997 Page B2We assume this is the "newly established credit facility" mentioned in some of the press clips as supplying some of the funding for the OMC venture. There are two articles in this section.
NEW YORK - Chase Capital Partners, the Private-equity arm of Chase Manhattan corp., said it will team with Detroit-based Penske Corp, to acquire $! billion of industrial businesses over the next three years.
Chase and Penske, a closely held transportation-services company, will each invest about $100 million in the venture, dubbed Penske Capital Partners LLC, and will finance the remainder of their acquisitions by "employing conservative amounts of leverage," said Donald J. Hofmann, a partner at Chase Capital Partners. Mr. Hofmann said the investors are looking to achieve average annual returns of 25% or more through three- to five-year investments in a variety of sectors, including machinery, manufacturing and automotive supply.
The effort will be headed by James A. Hislop, currently a managing director in the investment banking group at Merrill Lynch & Co.
Roger Penske, the chairman of Penske whose name has become synonymous with car racing and his nationwide truck-leasing network, said Penske Capital Partners would invest in areas where Penske Corp. has experience and management expertise. "What we have to do is look at opportunities which give us the ability to utilize our Penske Corp. capabilities, which include manufacturing, service logistics and marketing," he said.
Penske looking to invest in $1-billion industries
Detroit Free Press June 10, 1997 By Charlotte W. CraigRoger Penske, like some of the race drivers who work for him, appears ready to shift gears and make a major move on the rest of the automotive world. It's just not clear yet where he's headed.
Penske announced Monday the formation of Penske Capital Partners -- an investment pool with plans to buy industrial companies worth as much as $1 billion, starting perhaps as soon as the next few months.
What kind of industrial companies? That remains to be seen.
Auto supplier industry analyst Marc Santucci of East Lansing said Penske could choose to buy anything from machine tool manufacturers to die makers to auto parts makers.
"Their thinking is fairly broad," he said. "The original-equipment market is fairly well saturated, but Penske probably would be buying existing companies."
Sources close to Penske say the targets could be auto or truck parts makers, distribution companies or firms that lease fleets of trucks.
Penske Capital is starting out as a joint venture with Chase Capital Partners, an arm of Chase Manhattan Corp. But additional investors might be brought in, according to sources, to build a kitty of $300 million to $400 million in equity capital.
President and chief executive officer of Penske Capital will be James Hislop, an 18-year veteran of Merrill Lynch, where he is managing director in the company's investment banking group. Hislop will be based in New York but will maintain offices in Detroit.
Formation of the capital group means Penske Corp. now is the parent for nine subsidiaries with combined annual revenues of more than $6 billion and more than 25,000 employees worldwide:
All content © copyright 1997 Detroit Free Press
Detroit Diesel Extends Offer For 13.8M Outboard Marine Shrs
Dow Jones Newswires 26 August 1997DETROIT -- Detroit Diesel Corp. extended its tender offer to purchase 13,842,619 common shares of Outboard Marine Corp. to Sept. 3, under the terms of the merger agreement between the two companies.
In a press release Tuesday, Detroit Diesel said the tender offer was scheduled to expire Monday.
Detroit Diesel said about 536,592 shares of Outboard Marine common shares were validly tendered and not withdrawn as of Sunday.
All terms and conditions of the transaction remain the same, except the expiration date, Detroit said.
Copyright © 1997 Dow Jones & Company, Inc.
Detroit Diesel Again Extends Tender Offer for Outboard
Wall Street Journal 27 August 1997Detroit Diesel Corp. again extended its $16-a-share tender offer for Outboard Marine Corp., but most Outboard shareholders aren't biting. Meanwhile, Outboard Marine's board said it can't give shareholders much guidance.
Detroit Diesel said as of Sunday 536,592 shares, or about 4% of the 13.8 million shares it seeks, had been tendered. The Detroit engine maker's $350 million offer, made last month, will expire at midnight next Wednesday.
A rival bid of $18 a share from New York-based Greenway Partners L.P., investor George Soros and others remains on the table.
In a Securities and Exchange Commission filing, Outboard Marine, based in Waukegan, Ill., said its board "is unable to make a recommendation either in favor or in opposition to" Greenway's higher offer. Outboard, a manufacturer of outboard motors, cited "uncertainties and contingencies" it said are beyond its control, including financing conditions and a Greenway requirement that 90% of Outboard's shares must be tendered.
In New York Stock Exchange composite trading, Outboard Marine's shares rose 6.25 cents to $17.875.
Copyright © 1997 Dow Jones & Company, Inc.
Status Of OMC / Volvo Joint Venture Stern Drive Facility in Lexington TN
RBBI 15 July 1997 Gary PolsonWe received a few inquiries asking about the Penske acquisition impact on the Lexington TN OMC / Volvo Joint venture stern drive facility. Before the acquisition, OMC had a 40% share in the facility and Volvo had the remaining 60% share. Some wonder if Penske will really be in the stern drive business or if their might have been some Volvo buyout clause in the venture if OMC changed hands. We have seen no mention of the facility in any of the press releases or news coverage. The OMC / Volvo venture was announced 2 June 1992, concluded 3 September 1992, and production began in 1993.
July 12, I e-mailed the Detroit Diesel spokesperson listed on their press releases with the question. I have not yet received a response. July 14, I called OMC's headquarters in Waukegan IL and left my question as a message for their PR spokeperson. OMC spokeswoman, Marlena Cannon called me back in a few hours and said she was not even aware of the Lexington TN facility and had to ask around to finally find anybody who was aware of it. She had visited with their lawyer working on the negotiations (Gordon Repp) and he had said something about them being a limited partner in the operation, the employees were not OMC employees, and they were not sure whether they really sold it or not. She said she would be happy to connect me with Mr. Repp where I again left a message and was called back in a couple hours. Mr. Repp reconfirmed they (OMC) are a limited partner having a 40% share. He said he was not familiar with the terms of the OMC / Volvo venture agreement and is not sure if there is some sort of surviving partner buyout provision or not. He says that if the current Detroit Diesel merger does go through, that whatever OMC owns, the new corporation will own. If there is some sort of buyout clause, that money will go to the new corporation. He added they were currently "technically" in a "quiet period" and there was not a lot more he could ad. I would like to thank those at OMC for their prompt, informative, and courteous responses to my questions at a time when I am sure they are very busy.
I will see if we can find some more out about the terms of the OMC/Volvo joint venture agreement and post more information as it becomes available.
Major Components of Penske Corp
RBBI Comments
A few financial comments:
Businesses are usually sold at a price based on some combination of these methods:
On the "stuff" method, boating companies have traditionally traded hands at much higher values than their calculated actual values. The difference is said to be "goodwill." The good name of the company is said to be worth a huge amount of money. This "goodwill" is written off later as a depreciable asset. This practice has been challenged by the government in some boating industry cases. What happened, is the purchaser assigned a low value to the actual business and a high value to goodwill and tried to write it off. Whether they were high or low is not for us to say, we only note that the government challenged them on it.
On the cash stream method, many companies trade hands at a value near their annual sales. If the company being purchased is in a relatively stable industry, their annual sales are reasonably predictable. If they have been making about "x"% on their annual sales, or if the purchaser things they can run them a little better and make the percentage his company feels is needed on annual sales, their investment is the annual sales amount so the return on annual sales is fairly predictable. Many companies make about 10% on annual sales. If you purchase them for whatever their annual sales are, run them somewhat similarly in a similar environment, your income will be 10% of your purchase price (which is also 10% of annual sales). Using this concept, OMC's annual sales were $1.1 billion dollars in 1996. Penske is purchasing them for $500 million (or $323 Million if you want to move the debt out). Either way it is way below the annual sales figure. This is because OMC has been losing money ($7.3 million in 1996 and $21.6 million in first 6 months of fiscal 1997)). If he can take it to earning 10% in a few years, he will have quite a bargain.
DETROIT DIESEL CORPORATION TENDER OFFER TERMINATED
Detroit Diesel Press Release 12 September 1997DETROIT, MI -- Detroit Diesel Corporation (NYSE: DDC) today announced that its previously announced tender offer to acquire 13,842,619 shares of common stock of Outboard Marine Corporation (NYSE:OM), has been terminated. In addition, DDC's merger agreement with OMC has been terminated pursuant to an agreement with OMC. The tender offer had been scheduled to expire on September 15, 1997.
Detroit Diesel Corporation is engaged in the design, manufacture, sale and service of heavy-duty diesel and alternative fuel engines, automotive diesel engines, and engine-related products; and provides financing through Detroit Diesel Capital Corporation. The Company offers a complete line of diesel engines from ten to 10,000 horsepower for the on-highway truck; construction, mining and industrial; automotive; coach and bus; marine; power generation; and military markets. Detroit Diesel services these markets directly and through a worldwide network of more than 2,500 authorized distributors and dealers. DDC is a QS-9000 certified company.
Detroit Diesel's major shareholder is Penske Corporation, a closely-held, diversified transportation services company whose operations include Penske Truck Leasing Company, Diesel Technology Company, AG Kuhnle, Kopp and Kausch, Penske Automotive Group, Inc., Penske Auto Centers, Inc., Penske Motorsports, Inc., and Penske Capital Partners. The Penske group of businesses has annual revenues exceeding $6 billion and employs more than 28,000 people around the world.
Copyright Detroit Diesel Corporation 1997
Return to Recreational Boat Building Industry Home Page