Revlon Mulls Alternatives to Offer by Pantry Pride

Revlon Inc. said Wednesday that its directors are weighing a liquidation or leveraged buy-out of the company in addition to a sweetened $1.5-billion takeover offer from Pantry Pride Inc.

Revlon said another U.S. company, which it did not identify, also is ready to discuss a takeover of the cosmetics and health-care concern.

Revlon said its directors met for an hour Tuesday night to consider the proposals but took no action, and it urged Revlon’s shareholders to “not make any decisions with their Revlon investment pending further advice from the Revlon board.”

No date has yet been set for the next board meeting, Revlon said.

Revlon’s decision to entertain the various proposals was sparked by Pantry Pride’s determined effort to purchase the company despite Revlon’s adoption of several anti-takeover measures.

Increased Offer

Pantry Pride, a Fort Lauderdale, Fla.-based operator of supermarkets and retail stores, offered last week to increase its bid for Revlon to $50 a share from $42 if Revlon dropped some of the takeover defenses.

Revlon had yet to respond to that offer when the board received both the revised Pantry Pride bid and the expression of interest from the unidentified company 15 minutes before the Tuesday meeting, Revlon said in a statement. It described the unidentified company only as a “major American corporation.”

Pantry Pride offered to raise its bid to $53 a share, “conditioned on the Revlon board of directors accepting it” at their meeting, said Revlon, which has 28.3 million common shares outstanding.

But Revlon said its investment adviser, Lazard Freres & Co., “believed that more than $53 per share could be realized pursuant to an alternative transaction or a liquidation” and that the board should study all of the proposals further.

Keeps Door Open

Still, Revlon said it requested that Pantry Pride “continue to keep open its new $53 (a share) cash merger proposal so as to permit the Revlon board to consider it along with the other proposals.”

Wall Street appeared to anticipate that Pantry Pride’s bid might be topped, as Revlon’s stock climbed $4 a share to $54.375 in New York Stock Exchange composite trading Wednesday. Pantry Pride’s stock slipped 12.5 cents to $5.875 a share.

Revlon also did not specify whether terms were proposed for a leveraged buy-out, except to say that the buy-out group would include members of Revlon’s current management.

In a leveraged buy-out, the purchase is mostly financed with debt that is repaid with funds from the target company’s operations or the sale of its assets. The target company’s management often is included in the buy-out group.

Revlon spokesman Roger Shelley declined comment beyond the company’s announcement.

Pantry Pride also had no comment, said Roanne Kulakoff of Kekst & Co., a public relations firm representing Pantry Pride, which is controlled by the closely held New York investment firm MacAndrews & Forbes Holdings Inc.

In August, Pantry Pride offered $47.50 a share for Revlon but later lowered its bid after Revlon repurchased 10 million, or 26%, of its total common shares outstanding.

The stock buy-back was one of several steps that Revlon took to curb Pantry Pride’s attempt. The others included the adoption of a “poison pill” designed to make the acquisition of Revlon prohibitively expensive.

Specifically, the poison pill gives Revlon’s stockholders--other than the hostile suitor--the right to swap one share for $65 face amount one-year Revlon notes paying 12%. The rights would be activated if an unwelcome suitor such as Pantry Pride acquired 20% of Revlon’s stock.