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VARITY INITIATIVES INCLUDE EQUITY OFFERING AND SALE OF 50.2 PERCENT OF KELSEY-HAYES WHEELS UNIT TO PUBLIC

 VARITY INITIATIVES INCLUDE EQUITY OFFERING AND
 SALE OF 50.2 PERCENT OF KELSEY-HAYES WHEELS UNIT TO PUBLIC
 BUFFALO, N.Y., Oct. 28 /PRNewswire/ -- Varity Corporation (NYSE: VAT) announced today that new elements in its previously announced strategic restructuring program will include an offering of Varity common shares and an initial public offering of 50.2 percent of the wheels unit of its Kelsey-Hayes subsidiary. Varity had announced early this year its intent to pursue a strategic restructuring program designed to improve the company's growth prospects and strengthen its balance sheet,.
 Varity said that yesterday it filed a registration statement with the Securities and Exchange Commission covering the sale of 4.5 million Varity common equity shares to the public. The closing price of Varity common stock yesterday on the New York Stock Exchange was $20-7/8. Varity said it would use the net proceeds for the reduction of debt, working capital in its subsidiaries and other general corporate purposes. The company said that the offering would increase its financial flexibility to enhance growth opportunities in various of its businesses, particularly its anti-lock brakes system (ABS) unit.
 Varity also announced the filing of a registration statement for an initial public offering of 50.2 percent of Hayes Wheels International, Inc., which is a world leader in the design, manufacture and supply of aluminum and fabricated steel wheels to original equipment manufacturers of passenger cars and light trucks. The gross proceeds of the offering are expected to range from approximately $123 million to approximately $147 million.
 Varity stated that it also had filed a registration statement for an offering by Hayes Wheels of $105 million of senior notes due 2002.
 The combined proceeds of the public equity and debt offerings by Hayes Wheels will be used primarily to redeem the outstanding $212 million Kelsey-Hayes 13.25 percent senior subordinated notes due November 1994. The remaining proceeds will be used for general corporate purposes, including the repayment of bank debt.
 After repayment of debt from the proceeds of the Varity common stock offering, Varity's long-term debt to total capital ratio will drop to 50.7 percent from 56.2 percent, excluding the debt of the company's finance subsidiaries. This ratio would drop further to 38.6 percent upon the completion of the Hayes Wheels offerings.
 "These actions represent extremely positive developments for Varity shareholders," said Victor A. Rice, chairman and chief executive officer of Varity. "The Varity and Hayes Wheels offerings will enable Varity to accomplish its two top priorities: Reduce high-cost debt and fund our Kelsey Hayes high-growth ABS business, which is accelerating considerably faster than forecast. At the same time, the company will maintain just slightly less than a 50 percent interest in the dynamic wheels business."
 Mr. Rice said that the transaction would increase the financial flexibility of Hayes Wheels to capitalize on growth opportunities. He noted that Hayes Wheels has achieved the global supplier status necessary to grow in the future with automobile original equipment manufacturers, both domestically and internationally. Hayes Wheels, with 1991 sales of $399 million, is the only independent wheel manufacturer with leading market shares in both North America and Europe.
 Varity said that 4.5 million Varity shares would be offered to the public, 3.6 million shares of which will be offered in the United States and Canada, and 900,000 shares of which will be offered outside the U.S. and Canada. Varity will grant the underwriters an option to purchase an additional 675,000 shares solely to cover over-allotments.
 Hayes Wheels will offer 8.2 million shares to the public at a price of between $15 and $18 per share, 6.6 million of which will be offered in the U.S. and Canada, and 1.6 million shares of which will be offered outside the U.S. and Canada. Hayes Wheels will grant the underwriters an option to purchase an additional 1,230,000 shares solely to cover over-allotments. After the offering Varity will retain no more than 49.8 percent ownership.
 Mr. Rice said that Varity would continue to explore strategic initiatives to enhance shareholder value.
 The offerings of Varity equity and Hayes Wheels equity and debt will be underwritten by a group led by Smith Barney, Harris Upham and & Co., Incorporated and Goldman, Sachs & Co.
 Varity Corporation had sales of 1991 of $3.2 billion and is one of the 150 largest U.S. industrial firms. In addition to Kelsey-Hayes, Varity operations include Perkins diesel engines and Massey Ferguson farm equipment.
 -0- 10/28/92
 /CONTACT: Jerry Hostetter of Varity Corporation, 716-888-8073; or Phil Fried or Bob Stone of The Dilenschneider Group, 212-922-0900, for Varity Corporation/
 (VAT) CO: Varity Corporation ST: New York IN: MAC SU: RCN


LR-TS -- NY001 -- 5787 10/28/92 08:41 EST
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Publication:PR Newswire
Date:Oct 28, 1992
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