Amadeusz Juskowiak

Chemlawn chem rises on hopes for higher bids

ChemLawn Corp CHEM could attract a higher bid than the 27 dlrs per share offered by Waste Management Inc WNX Wall Street arbitrageurs said

Shares of ChemLawn shot up 1158 to 2938 in overthecounter trading with 38 mln of the companys 101 mln shares changing hands by late afternoon

This company could go for 10 times cash flow or 30 dlrs maybe 32 dollars depending on whether there is a competing bidder an arbitrageur said Waste Managements tender offer announced before the opening today expires March 25

This is totally by surprise said Debra Strohmaier a ChemLawn spokeswoman The companys board held a regularly scheduled meeting today and was discussing the Waste Management announcement She said a statement was expected but it was not certain when it would be ready

She was unable to say if there had been any prior contact between Waste Management and ChemLawn officials

I think they will resist it said Elliott Schlang analyst at Prescott Ball and Turben Inc Any company that doesnt like a surprise attack would

Arbitrageurs pointed out it is difficult to resist tender offers for any and all shares for cash Schlang said ChemLawn could try to find a white knight if does not want to be acquired by Waste Management

Analyst Rosemarie Morbelli of Ingalls and Snyder said ServiceMaster Companies LP SVM or Rollins Inc ROL were examples of companies that could be interested

ChemLawn with about two mln customers is the largest US company involved in application of fertilizers pesticides and herbicides on lawns Waste Management is involved in removal of wastes

Schlang said ChemLawns customer base could be valuable to another company that wants to capitalize on a strong residential and commercial distribution system

Both Schlang and Morbelli noted that high growth rates had catapulted ChemLawns share price into the mid30s in 1983 but the stock languished as the rate of growth slowed

Schlang said the companys profits are concentrated in the fourth quarter In 1986 ChemLawn earned 119 dlrs per share for the full year and 258 dlrs in the fourth quarter

Morbelli noted ChemLawn competes with thousands of individual entrepreuers who offer lawn and garden care sevice