Uniroyal Plans Buy-Out; Icahn to Drop Offer : Tire Maker to Merge With Investment Firm

Uniroyal Inc. and Clayton & Dubilier Inc. agreed Monday to merge in a leveraged cash buy-out worth nearly $746 million, a deal that would essentially make Uniroyal a private company.

In a joint statement, the two companies also announced that they had reached agreement with financier Carl C. Icahn to end his unfriendly takeover bid for Uniroyal, the nation’s fifth-largest tire company.

In the agreement, Uniroyal said it will pay Icahn $5.9 million to end a bid by his Robin Acquisition Corp., which had sought to buy 18 million shares of Uniroyal common stock.

“The parties also agreed to dismiss without prejudice the pending litigation in New Jersey state Superior Court relating to the validity of proxies in the recently enacted amendments to Uniroyal’s charter,” the statement said.

Icahn also had agreed to offer Uniroyal a right of first refusal on any stock that he or “Icahn entities” proposed to sell.

Meanwhile, Uniroyal and affiliates of Clayton & Dubilier said the leveraged cash buy-out would be for $22 a share of common stock. Uniroyal now has 33.9 million shares of common stock outstanding, making the deal worth $745.8 million.

The tender offer, which is expected to be completed in the third quarter of 1985, expires Nov. 6, the statement said.

Clayton & Dubilier is a private investment firm that specializes in buy-outs involving management participation. In a leveraged buy-out, a group, usually management, converts a public company to private ownership by buying control with borrowed money to be repaid from the company’s anticipated revenue.

The statement said that Uniroyal’s board had unanimously approved the merger agreement. Approval was still required by Uniroyal stockholders. The deal was also contingent upon meeting applicable laws and regulations and upon completion of financing.

No Outstanding Common Stock

The statement said that Clayton & Dubilier and Drexel Burnham Lambert had agreed to arrange all financing for the transaction.

Larry Clark, a Uniroyal spokesman, said the merger essentially would make Uniroyal a private company because, after a successful tender offer, there would be no outstanding common shares. However, existing publicly held preferred shares were expected to remain public domain, the statement said. As of April 17, the company had 611,141 non-cumulative preferred shares.

Joseph P. Flannery, Uniroyal chairman, president and chief executive, plans to participate as an investor in the merger and will remain as head of Uniroyal, the statement said.