Revlon on Monday rejected a takeover bid by Pantry Pride, saying it would buy back up to 10 million of its own shares at a price substantially higher than the stock's recent levels.
Previously, the company had said it would repurchase 5 million shares at an unspecified price.
Pantry Pride, which emerged from reorganization under federal bankruptcy laws in 1981, last week offered $47.50 a share for all of Revlon's 38.2 million shares of common stock and $26.67 a share for preferred stock. But it said its offer would be subject to obtaining financing for the transaction.
The Revlon board said it unanimously rejected the Pantry Pride offer on the basis of a recommendation of its investment banker, Lazard Freres.
It said it would exchange a package of notes and preferred stock that it values at $57.50 per share of common stock for each of up to 10 million shares.
On the New York Stock Exchange on Monday, Revlon closed at $46.375 a share, up 12.5 cents.
At Pantry Pride's Fort Lauderdale, Fla., headquarters, a spokesman said the company had not seen the formal terms of Revlon's offer and thus would not comment on it.
Revlon Chairman and Chief Executive Michel C. Bergerac called the Pantry Pride offer grossly inadequate and detrimental to the interests of the company, its shareholders, employees and the communities that it serves.
"Our board believes that the Revlon exchange offer provides our shareholders a far better alternative to the highly conditional and totally inadequate offer by Pantry Pride," he said.
Among other things, the Pantry Pride offer says that, if successful, Pantry Pride will sell basically all of Revlon's non-beauty group assets, which would bring between $1.675 billion to $1.9 billion, or between $43.73 and $49.60 per share of Revlon common stock.
It also said it intends to cause surplus assets of the Revlon employees' retirement plan to revert to the company.
Pantry Pride, which operates supermarkets, drug stores and furniture and appliance outlets, had sales of $770 million last year, compared to $2.4 billion reported by Revlon, which makes and markets beauty and health-care products.
In rejecting the offer, the Revlon board noted that the availability of Pantry Pride's financing is subject to numerous conditions, of which many appear difficult or impossible to meet--and that neither the company nor its investment banker, Drexel Burnham Lambert, has given any assurance that Pantry Pride can raise the money.
It also noted that Pantry Pride "has not even begun the lengthy registration process to sell the debt securities it needs to finance the Pantry Pride offer."
Last week, Revlon Chairman Bergerac indicated that the company wasn't interested in Pantry Pride's offer, and its board of directors promptly announced that it was putting in place several anti-takeover measures through a so-called poison pill.
The poison pill would be triggered if an unfriendly bidder purchased more than 20% of its stock. It would allow shareholders to exchange their stock for one-year Revlon notes with a face amount of $65 and a yield of 12%. Revlon also said it would repurchase 5 million of its own shares.
Last Thursday, Pantry Pride filed a lawsuit in the Court of Chancery in Newcastle County, Del., against Bergerac and the board, claiming that the action is illegal.
Among other things, the suit contends that the poison-pill proposal "alters the terms of the Revlon common stock without the approval of stockholders" in violation of Delaware law. The suit was filed in Delaware because Revlon is chartered there.
A hearing for a preliminary injunction request has been set for Sept. 10, according to Roanne Kulakoff, a spokeswoman for Kekst & Co. The public relations firm represents MacAndrews & Forbes Holdings of New York, which took over Pantry Pride several months ago.
Roger Shelley, Revlon's vice president for corporate affairs, called Thursday's suit "frivolous, without merit."