Material Sciences' Surprising Success

Material Sciences was deep in the red last year, and with its major markets--housing and autos--in a slump this year, prospects would appear to be bleak. But don't bet on it. Several pros believe that Material Sciences' stock, which has fallen to 11 from 17 last year, will perk up.

The main reason: Soon, some big investors expect this maker of protective coating and laminating materials used mainly in auto components, building materials, and appliances to announce the outcome of buyout talks.

Last summer, Material Sciences' outside directors persuaded the board to let an investment bank, Chicago-based William Blair, seek some alternatives to boost the company's sagging stock, including selling the company. Don Pattison, an analyst at C. J. Lawrence, Morgan Grenfell, figures that 12 groups signed confidentiality pacts to get detailed financial information. Six companies are said to have expressed serious interest, but one takeover investor says a German company and two Japanese industrial companies are the top contenders. Takeover analysts put Material Sciences' buyout value at $18 to $22 a share. A spokesman says the board will again discuss potential moves, including the company's sale, at a board meeting in late January.

But even without a takeover, Pattison figures that the stock should sell for $15 to $18 a share. The company is benefiting from the "shift to quality" by carmakers, which want to provide longer warranties for their vehicles against such things as rust, says Pattison. Also, demand is growing for energy-saving materials for offices and homes. So the recent three quarters have been profitable. Pattison forecasts earnings of $1.50 a share for the year ending Feb. 28, and $1.80 in fiscal 1992, vs. a year ago's loss of $6.10.