Firm Willing to Top Bid by Management Group : Forstmann Little Makes Offer for AFG

The New York securities firm of Forstmann Little made a competing bid Wednesday for AFG Industries, the Irvine-based glass manufacturer that has agreed to go private in a management-led buyout.

Forstmann Little, which specializes in leveraged buyouts, said it is willing to make an all-cash offer for AFG Industries at a price in excess of the management group’s offer of $33 per share.

A spokesman for Forstmann Little refused to say how much more than $33 per share the firm would be willing to pay for AFG, the nation’s second-largest manufacturer of flat-glass products.

On Tuesday, a management group headed by AFG Chairman R. D. Hubbard launched an $883-million cash tender offer for 94% of AFG’s common stock. The group has proposed exchanging the remaining shares for preferred stock or a combination of cash and preferred stock.

The management offer was approved last week by AFG’s board of directors.

Several large AFG shareholders, however, have said that they consider the $33 offer to be too low. Analysts have estimated the company’s value at $35 to $45 per share.

“Thirty-three dollars is not an unreasonable price and it is not unfair, but I think investors should be getting more,” said Larry Selwitz, an analyst with Bateman Eichler, Hill Richards, a Los Angeles brokerage.

In a prepared release, Forstmann Little said its willingness to increase its bid will depend on the “prompt receipt” of information from AFG and a “prompt opportunity to confer” with AFG’s management.

AFG executives, including Hubbard, were not available for comment.

Selwitz said he considered it unlikely that Hubbard would give in easily to the competing offer.

“Hubbard really want’s this deal,” Selwitz said.

Forstmann Little is known for its ability to take public companies private, usually in cooperation with management. It has access to $2.4 billion from outside investors through a number of leveraged buyout funds.

Its strategy generally has been to take on large amounts of debt to buy a company, sell off some of its assets and use the sales proceeds and cash flow from remaining operations to pay down the debt.

In many cases, Forstmann Little has later taken its acquisitions public again, realizing significant gains for equity holders. It has acquired 12 companies since its inception in 1978 for a total of about $5 billion. Its previous acquisitions include Lear Siegler, Dr Pepper Co. and Topps Co.

Under Hubbard’s leadership, AFG has profited by taking part in hostile takeovers, including a $2.2-billion bid for Gencorp, an Ohio conglomerate, and a $1.5-billion offer for Lear Siegler.