SCM Seeking to Block Hanson Stock Buying
SCM Corp., which has agreed to be acquired by an investment group that includes its own senior managers, went to court Thursday seeking to block a hostile suitor, Hanson Trust PLC, from buying more of its shares.
SCM won a temporary court order late Wednesday stopping such purchases pending a hearing on the case.
The hearing was scheduled to continue this afternoon, a clerk said.
Calls seeking comment from Hanson Trust officials and its investment adviser were not returned Thursday. SCM’s spokesman, Herbert Katz, also did not return phone calls.
U.S. District Judge Shirley Wohl Kram issued a temporary restraining order Wednesday night blocking Hanson from acquiring any SCM shares for 24 hours.
Her order also said that the British-based Hanson could not close any open trades for SCM shares, but it later was modified to allow Hanson to keep in escrow any shares that it had agreed to buy before Kram issued the order, SCM said.
SCM alleged that Hanson violated federal securities law by purchasing SCM stock from arbitrageurs and others after it had dropped its $72-a-share offer for SCM on Wednesday.
An arbitrageur is a risk taker who invests in stocks of takeover candidates but does not seek to acquire a company.
SCM announced a new agreement Wednesday morning to be acquired by a company to be formed by Merrill Lynch & Co. and some of SCM’s top executives in a cash and securities transaction valued at about $906.5 million.
The offer of $74 a share was $2 a share higher than the most recent bid by Hanson, which then withdrew its offer.
The Merrill Lynch-led bid is conditioned on shareholders selling at least two-thirds of SCM’s stock to the Merrill Lynch group.
If Hanson Trust should buy slightly more than one-third of the stock, or about 4.1 million shares, it would have a good chance of upsetting the takeover agreement.
In addition to the sweetened offer, the Merrill Lynch group succeeded in blocking Hanson Trust’s bid by gaining what are known as “lock-up options” from SCM to buy its Durkee foods and spices business for $80 million and its chemical pigments business for $350 million.
Such an agreement enables a friendly bidder to acquire essential portions of a business, making the acquisition of the remaining portion of the company less attractive to a hostile suitor.
Hanson Trust had said earlier that its takeover offer was conditioned on SCM not granting any lock-up options to other bidders.
SCM also makes Smith-Corona typewriters and Glidden paints and it has interests in paper products.
When Hanson Trust first launched its bid with a $60-a-share offer Aug. 21, SCM stock was trading at $55. SCM closed Thursday at $72.825 a share, up 25 cents in New York Stock Exchange composite trading.
2 to Provide Funds
Merrill Lynch had agreed earlier to form a company that would acquire SCM for $70 a share, but it broke off that agreement last week after Hanson Trust increased its offer by $12 a share.
Under the latest merger agreement, SCM said a cash offer would begin next week for up to 10 million shares, or about 80% of SCM’s outstanding shares.
If successful, the offer will be followed by a merger in which the remaining shares will be converted into bonds of the new corporation, also valued at $74 a share.
SCM also said that Merrill Lynch and Prudential Insurance Co. of America have entered into definitive agreements to provide the funds required to complete the leveraged buy-out.
In a leveraged buy-out, money is borrowed to complete a takeover and the assets or cash flow of the business being acquired is used to repay the debt.
SCM had earnings of $41.8 million on sales of $2.18 billion in the fiscal year ended June 30.
Hanson Trust, based in London, had U.S. sales last year of more than $1.5 billion.
Its businesses in the United States include Endicott Johnson, a shoe company; Hygrade Food Products, a meat products business; Ames Co., a producer of garden tools, and U.S. Industries, a lighting fixtures business.