Briggs & Stratton Corp. said Tuesday it may buy some assets of Murray Inc., the lawn mower manufacturer that filed for bankruptcy and owes Briggs $40 million.
Briggs is trying to recover money for engines it sold to Murray last spring. The Brentwood, Tenn., manufacturer of riding mowers, as well as snow blowers and go-carts, sought Chapter 11 bankruptcy protection in November.
Briggs may purchase Murray assets to help collect its money, although doing so would require Briggs to write off substantially all the remaining debt and take a $30 million loss against the current fiscal quarter.
"This is a very complex situation," said George Thompson III, Briggs vice president of communications. "These discussions are in a preliminary stage."
After the announcement, Briggs stock closed at $39.22, down 28 cents.
Briggs had about $1.95 billion in sales in fiscal 2004. Murray has been Briggs' third-largest customer, and in October Briggs increased its reserve for uncollectible receivables by $10 million in the event that some of the $40 million goes uncollected.
Murray has been put up for sale amid financial turmoil surrounding its Chinese parent company, Shenyang Hejin Holding Co. Murray recently laid off a third of its salaried work force in Tennessee in an effort to cut costs and become more attractive to potential buyers.
Through Murray's bankruptcy, Briggs might end up owning part of the company, said Kent Mortensen, an industry analyst with Thrivent Investment Management in Appleton.
Murray products are sold in large discount stores such as Wal-Mart and Home Depot. Briggs could benefit from acquiring some of Murray's assets, such as its distribution channels or manufacturing plants, according to Mortensen.
Briggs has a strong reputation as the world's largest small-engine manufacturer. But, unlike Murray, the company doesn't make lawn mowers.
"It might make sense for Briggs & Stratton to develop some sort of Briggs brand lawn tractor," Mortensen said.
Murray has value, but the question is how much, he added.