Hechinger Co.will sell 1.8 million shares of class A common stock to help finance its drive to add approximately 28 stores to its chain of 47 retail home stores during the next two years, company President John W. Hechinger told stockholders yesterday.
The offering, which is being underwritten by Morgan Stanley & Co., will bring in an estimated $42.2 million before expenses. Hechinger officials said the proceeds would be added to $112 million that the company has on hand for expansion. Of the $112 million, $86.25 million represents the proceeds of a bond offering last fall.
An additional 625,000 class A shares will be sold by members of the Hechinger and England families.
Hechinger said at yesterday's meeting that the new program would boost the company's retail selling space by 2.6 million square feet, or 70 percent.
To a stockholder who said she was concerned about the fast pace of the company's expansion, Hechinger replied:
"We're not swallowing up the world, we're not talking about being national, we're keeping in a tight-ripple-effect kind of expansion." Hechinger also described his company's personnel as the "major ingredient" in the success he expects for the expansion program. He said Hechinger has 47 managers who average 16 years with the company and 147 assistant managers who average eight years' experience. Half of these assistants are ready to be managers, he said.
Hechinger expects to open 10 new stores this year, including one each in Philadelphia, Baltimore and Washington, after opening four last year and seven the year before.
Hechinger's decision to sell additional class A stock follows an earlier move to give stockholders a 5-for-4 stock split. The additional shares will be issued June 17 to stockholders of record June 7.
Hechinger moved to two classes of stock several years ago to avoid any attempts at a takeover. Class A stock, with one vote per share, pays a 16-cent annual dividend; class B stock, with 10 votes per share, pays 8 cents. Shareholders are permitted to convert from class B to class A on a one-for-one basis. The Hechinger and England families own the largest share of Class B stock and thus have voting control. The two families are related by marriage.
Of the 2.5 million class A shares to be sold, 1.875 million will be new shares to be issued by the company, while 625,000 will come from family members. The company will get the proceeds of the sale of the 1.875 million shares, expected to bring about $22.50 a share after the 5-for-4 split.