Rejection of Buyout Offers Sends Coastcast Down 21%

Coastcast Corp., a Rancho Dominguez maker of cast-metal golf club heads and medical tools, said Tuesday that it has refused several recent buyout offers, sending its shares plunging nearly 21% despite a strong earnings report.

The company did not identify the bidders.

Coastcast had hired Bear, Stearns & Co. in May to advise it on strategic alternatives, including acquisition offers. But “the company did not receive any proposal at a price which the board of directors considered to be attractive,” Coastcast Chief Executive Hans Buehler said in a statement.

That drew jeers from investors who had expected the company, laden with cash but suffering from a low stock market valuation, to be taken private in a buyout, said Mario Cibelli, an analyst at Robotti & Co., a New York investment firm. Shares of Coastcast fell $3.75 to close at $14.25 on the New York Stock Exchange.

Contributing to investor confusion was the company’s reluctance to discuss the specifics of the offers, Cibelli said.

The company said its second-quarter net income rose 21% to $4.1 million, or 52 cents a share, as sales rose 39% to $46.7 million.

Sales for the second half of the year would be weaker than in the first half, Buehler said. Analysts noted that Coastcast’s prior warnings have not always been accurate. They pointed to a statement by Buehler in January 1999 that sales in 1999’s first two quarters “may not be better than the fourth quarter of 1998,” when the company had $24 million in revenue. That statement, which led to a drop in share price, later proved overly pessimistic: The company had sales of $27.1 million and $33.6 million, respectively, in the first and second quarters of 1999.