Leucadia Boosts Stake in National Intergroup : Firm Says It Will Try to Gain Seats on Board, Liquidate Ailing Company
Leucadia National has increased its stake in financially troubled National Intergroup to 9% from 7.2% and will try to liquidate the financial-services and steel company, papers filed Tuesday with the Securities and Exchange Commission show.
The news comes one week after the collapse of National Intergroup’s plan to merge with Bergen Brunswig, a fast-growing drug-distribution company in Los Angeles. The failure of the proposed merger pleased Leucadia, a New York financial-services firm that waged an unsuccessful proxy fight to block the deal and force a liquidation of the Pittsburgh steelmaker instead.
Shareholders of Bergen and National Intergroup approved the merger plan earlier this year, but Bergen pulled out last Wednesday, shortly after National Intergroup downgraded its 1984 profits to $13.7 million from the previously reported $52.6 million.
National Intergroup, formerly National Steel, was one of two U.S. steelmakers to show a profit in 1984. But the change in reported 1984 profits was significant enough to play a major role in Bergen’s decision to cancel the merger. When the cancellation was announced last Wednesday, National Intergroup also said it expects to lose $1 a share for the first quarter of 1985 ended March 31.
Dissident shareholder Leucadia owned 7.2% of National’s 20 million outstanding shares when the merger fell apart. According to SEC filings Tuesday, Leucadia has paid $9.1 million since then to buy an additional 1.8%, or 373,300 shares, in the company. Leucadia now owns 1.8 million shares.
An attorney for Leucadia said the increased stake will help the company elect a group of its own directors to the board at National’s next annual meeting and to present shareholders with a resolution to sell off National’s assets.
National has not publicly announced when it will hold this year’s shareholder meeting nor the precise number of directors up for election. But, based on proxy materials that National issued for the 1984 meeting last May, the lawyer for Leucadia said she expects as many as four director seats to be up for election.
Executives at National could not be reached for comment late Tuesday.
Bergen’s rationale for acquiring National was access to the company’s approximately $300 million in cash and another $300 million in tax credits from previous loses. The credits would have shielded Bergen’s robust profits and the cash would have let Bergen accelerate its growth by acquiring other companies in the health-care field.
But Leucadia and other dissident shareholders maintained since the merger plan was unveiled last fall that shareholders would gain more by liquidating National. Selling off the firm’s assets would bring holders anywhere from $35 to $45 a share, according to the range of estimates by Leucadia and others.
Under the proposed merger, National’s stockholders would have received 1.225 shares of Bergen for each share in National. On March 8, National shares were trading for $30.75 and would have been swapped for Bergen shares worth $32. National stock closed Tuesday down 25 cents at $25.625 a share on the New York Stock Exchange.
The 74% cut in National’s 1984 reported earnings reflected “unauthorized” transactions by its aluminum unit.
