Shareholders of Outboard Marine Corp. have two weeks to decide which marriage proposal to accept, and at first glance it looks like an easy decision.
Detroit Diesel Corp. is offering $16 a share for the Waukegan-based manufacturer of outboard engines and boats, while Greenmarine Acquisition Corp. is offering $18, 12.5 percent more.
“We’re just telling people, go ahead and take the 18 bucks if you own OMC stock,” one investment analyst said.
But, as with any romance tale, there’s more than money behind the proposals. A key issue is whether OMC, which makes outboard motors and boats, will remain intact after it’s sold.
Detroit Diesel, a unit of Penske Corp. that makes engines for heavy-duty vehicles, has indicated it likely would keep all OMC operations, at least for the short term.
On the other hand, it is widely speculated that Greenmarine would break up OMC and sell it. Greenmarine consists of several major OMC investors–notably Greenway Partners, which owns about 9.9 percent of OMC.
Greenmarine principal Alfred Kingsley would not discuss plans for OMC. But people familiar with the group note that its business is investing, not running companies.
For example, Kingsley waged an unsuccessful proxy fight last spring to force Chicago-based Inland Steel Industries Inc. to divest the majority stake it still holds in metals-distributor Ryerson Tull Corp. to boost the share price of both firms.
Detroit Diesel’s offer, made in July, laid an egg on Wall Street, which had anticipated a price closer to $20 a share. Analysts and investors speculated that a more generous suitor would appear.
At the time, OMC’s chairman, Harry Bowman, noted that Salomon Brothers Inc., hired by OMC to help find sources of cash, had rendered a fairness opinion on the offer. “When you go back and look at the company’s 1996 earnings and 1997 first-half earnings . . . I think you can draw some conclusions about the fairness of the offer,” he said then.
The company lost $7.3 million in fiscal 1996 and $21.6 million in the first half of 1997.
On Monday, OMC exercised its right to ask Detroit Diesel to extend its tender offer period for two weeks. The period was to have expired Monday.
An OMC spokeswoman said it would be “a jump” to interpret that move as indicating the board favored either bid. The company needs time to examine both bids fairly, she said.
Greenmarine set a Sept. 8 deadline for OMC to respond, and suggested the decision is simple math: $18 is more than $16.
OMC stock tumbled $3.62 to $15.87 after Detroit Diesel’s offer. News of Greenmarine’s offer Friday lifted the stock to $17.75 in heavy trading.
It closed Tuesday at $17.81, down 12 cents.
