Pantry Pride, taking a new tack in its month-old takeover bid for cosmetics giant Revlon Inc., on Friday withdrew its $47.50-a-share cash tender offer for all Revlon shares and said it would soon substitute a $42-a-share cash offer.
Sources close to Pantry Pride insisted that the company still hopes to succeed in its effort but that it revised the offer to reflect the company’s lower value in light of its new, higher debt load and the cost of the anti-takeover “poison pill” that Revlon has put in place.
As part of its anti-takeover fight, Revlon is buying back 10 million, or 23%, of its outstanding shares of common stock, a transaction that will roughly double its long-term debt, to $942 million. Separately, the poison pill provides that, if a shareholder accumulates 20% of the company’s stock, other holders can swap their shares for $65 face amount of 12% one-year Revlon notes.
“Revlon has been restructured financially in a way that makes the company worth a lot less, and this simply takes that into account,” said a source close to the bidding company.
Pantry Pride said its new offer would cost an estimated $1.34 billion, compared to the first offer’s $1.9-billion price. The retailer said the offer is not conditioned on withdrawal of the poison pill but will be made only if Pantry Pride receives 90% of Revlon’s shares and raises sufficient funds to pay for the offer.
The bidder said that, if the poison pill is withdrawn or defeated in its pending legal challenge, it may increase its offer or waive the condition that the offer is good only if 90% of all shares are tendered.
Pantry Pride’s new offer drew a mixed reaction from Wall Street, with some analysts predicting that the maneuver was a prelude to a complete withdrawal by Pantry Pride and others insisting that better offers may yet be made by Pantry Pride or others.
Pantry Pride said it no longer will need to issue high-yield, low-rated “junk” bonds on the open market to help finance the deal. The company said that its financial adviser in the deal, Drexel Burnham Lambert, expects that it can sell bonds in a private placement.
Pantry Pride said that it will return shares that already have been tendered. The company offered $26.67 for Revlon convertible preferred shares, as well as $47.50 for Revlon common shares. The new offer is to made in five days.