Immediately the negotiations faltered when UIS demanded that Walbro make UIS its exclusive distributor for its aftermarket electric pumps for 10 years -- and sell the pumps to UIS at cost. The Walbro negotiators at first thought they were joking.
As the smiles faded, the Walbro managers, disgusted, got up and left their investment bankers to take over the negotiations, which carried on fitfully before breaking down at 8:30 p.m., only to be revived by a late-night phone call from one of Walbro's lawyers to a personal friend who also happened to be the UIS investment banker's attorney. That jump-started the negotiations, which dragged into the next day before faltering again late in the afternoon. "By now, we had the sense that egos had really gotten involved," Forrest Walpole recalls. "Our investment banker seemed intent on letting UIS's investment banker know how smart he was. It was time to cut through all that and let one businessperson talk to another."
Around 7:00 p.m. Althaver called Pietrini, and they talked for about half an hour. UIS, fearing possible lawsuits from disappointed takeover speculators, wanted an across-the-board indemnity, guaranteed by Walbro. Althaver, by now up to his eyeballs in lawyers, refused. He did, however, give a little on reaching an agreement for UIS to distribute Walbro's fuel pumps. The two men also settled on a price and timetable for UIS to sell its shares back to Walbro. UIS, which had paid an average of $22.15 per share for its 8.6% stake in Walbro, would sell them back to the company for $25.50 each, or a total cost to Walbro of almost $7.3 million. Walbro ensured UIS a profit on its aborted raid. UIS spared Walbro the nightmare of a protracted court case.
The lawyers began drafting the disengagement language, but failed to finish before running out of steam at 3:30 a.m. Althaver, weary, looked around for a hotel in the neighborhood and could find only a not-so-modest establishment called the Helmsley Palace, where he slept for all of three hours. His room that night set him back $250.
The lawyers' work again consumed all of Tuesday, October 13, 1987. By early evening they were done, and that is when Bert Althaver finally met Andrew Pietrini face-to-face. Pietrini shook hands with Althaver and told him he was sorry the two companies couldn't have gotten together. Althaver snarled inwardly and said only, "Where do I sign?" He handled the necessary paperwork and then added curtly, "Can I go now?"
As Althaver walked out of the lawyer's office, he found men clapping him on the back and proffering congratulations. He felt numb. He felt lousy. He had just spent millions in order to "save" his company.
The Charmont Inn is a hub of activity in downtown Cass City. Under one roof sit a bar, a restaurant, and a bowling alley, which doubles as the registration desk for the motel across the street -- where a room for the night cost about a fifth as much as at the Helmsley Palace. With the clatter of falling pins resonating through the restaurant, Bert Althaver nurses a drink at the end of a long day. "What bugs you about the whole thing is here you are going down the road, doing the best job you can. And now out of the blue comes a third party whom you've never done anything to, and suddenly your company's in play. We could have lost the battle. I was angry. You don't have control of your destiny in a situation like that."
As Althaver reminisces about Walbro's escape, he adds, "I think we really dodged a bullet. I guess sometimes in life it's better to be lucky than good." UIS didn't bump the price. No other hostile bidder appeared. GECC did appear. If Walpole hadn't sold stock to townspeople 33 years before, it's doubtful there would have been a large enough block in friendly hands on which to base a credible defense.
Good fortune aside, Althaver worries that the attempted takeover has changed his company in subtle yet fundamental ways. Recently Walbro laid off 75 workers. He suspects that before the takeover attempt the company wouldn't have moved so quickly and in such arguably draconian fashion. What sort of a signal does that send to his stakeholders? With Walbro now saddled by substantial debt, Althaver wonders if R&D, crucial to Walbro's very reason for being, will inevitably suffer.
The cost of staying free has been huge. The out-of-pocket fees to the various soldiers of fortune in three-piece suits totaled almost $5 million -- 80% of the company's record 1986 profits. Indirectly, Walbro spent $17 million buying back stock, money it had to borrow. Walbro went into the UIS fight with a long-term debt-to-equity ratio of 2% and came out at 71%. Interest expense in 1987 of $175,000 turned into almost $4 million in 1988.
Does Althaver feel Walbro is now safe? "You're never safe as long as you're a public company and you don't own 51% of the shares."
When asked why Ford, for example, with $9 billion in cash, doesn't just buy Walbro, he nods, offering a faint smile, "We'd be petty cash to Ford." He relates that Walbro licensed Ford to use its fuel-pump technology, giving Ford the most detailed of drawings so it could make some fuel pumps in-house and buy the rest from Walbro. But Ford, two years later, has yet to work out all the bugs and meet its targeted quota. It continues to buy more fuel pumps than anticipated from Walbro.
Two months after Walbro finally untangled itself from UIS's grasp, Althaver went to New York City to speak to a financial analyst at Shearson Lehman Hutton Inc. about the company. His pilgrimage bespoke his dilemma. He had to tell Wall Street about his company so the market might more fairly price its stock. Yet Althaver would be far happier working away in Cass City, just making the company tick. After their talk, the analyst took Althaver over to the corporate-finance side of the company. There he met a vice-president who handed him a book thicker than the Cass City phone directory. It listed a host of companies Shearson had screened -- potential acquisition targets. He invited Althaver to peruse the book. Maybe he'd find a company he'd like to buy.
