Pantry Pride Launches Bid for Revlon : Target of Hostile $1.9-Billion Offer Plans Stock Buy-Back
Pantry Pride on Monday launched a hostile, $1.9-billion offer to buy Revlon, a company with three times its annual revenue.
Revlon’s chairman declared that the health and beauty care company is not for sale. Revlon’s board began setting up a defense by authorizing a stock buy-back and the issuance of a special dividend that would make an unwanted takeover bid costly.
Fort Lauderdale, Fla.-based Pantry Pride, which emerged from reorganization under federal bankruptcy laws in 1981, said it intends to begin a cash offer to buy all of the common stock in New York-based Revlon for $47.50 a share in cash and all of its preferred stock for $26.67 a share.
Subject to Financing
At the close of trading Monday, Revlon was up 87.5 cents at $45.625 a share. Pantry Pride was down 25 cents at $7.50 a share in composite trading on the New York Stock Exchange.
Pantry Pride had revenue of $770 million last year, compared to $2.4 billion reported by Revlon.
Pantry Pride said its offer would be subject to obtaining financing for the transaction, which it estimated at $1.9 billion.
Pantry Pride, which operates supermarkets, drug stores and furniture and appliance outlets, said it has about $750 million in cash and marketable securities and a bank commitment for $500 million. It said it intends to raise the remaining funds by borrowing through the sale of debt securities.
Ronald Perelman, chairman of Pantry Pride, said Revlon refused an offer to negotiate.
Revlon, meantime, said it would sue Pantry Pride and its parent, MacAndrews & Forbes Holdings, in federal court in Delaware, alleging violations of federal securities laws.
“Revlon is not for sale. We are not seeking acquisition proposals,” said M. C. Bergerac, chairman of Revlon. “Our board of directors believes that the Revlon shareholders should be protected against a junk-bond, bust-up takeover.”
In Wall Street jargon, a junk-bond, bust-up takeover involves a merger financed with high-yielding securities that are paid off by selling off parts of the company being acquired.
Revlon said its board unanimously authorized the discretionary purchase of up to 5 million of its 38.254 million outstanding common shares.
It also declared a special dividend of a special note-purchase right on each outstanding share of common stock, to be distributed to shareholders of record as of Aug. 30. The right would enable a shareholder to exchange one share of common stock for a one-year note from Revlon promising to pay $65 and 12% interest.
The right would be exercised if a person or group acquires 20% of Revlon’s stock and could not be exercised by the hostile suitor.
By raising the price of as much as 80% of the company’s stock to $65 a share, Revlon would make a takeover more costly and would leave a buyer even more heavily in debt.
