Beatrice Cos. on Wednesday became the latest food company on Wall Street to be the target of a takeover attempt when the New York investment firm of Kohlberg, Kravis, Roberts disclosed plans to offer $45 a share, or a total of $4.9 billion, to acquire the Chicago-based company.
Kohlberg, Kravis, which specializes in leveraged buy-outs, said it would make a written buy-out proposal of $45 a share in cash and securities. It did not elaborate, but it is expected to deliver its proposal to Beatrice today. In a leveraged buy-out, investors purchase a company by borrowing heavily against the target company's assets as collateral.
Donald P. Kelly, formerly chairman of Esmark until it was acquired by Beatrice in August, 1984, is involved in the attempted buy-out, but a spokesman for Kohlberg, Kravis would not elaborate on Kelly's involvement. Beatrice outbid Kohlberg, Kravis in its successful acquisition of Esmark in May, 1984.
Kohlberg, Kravis' announcement came shortly after Beatrice asked the New York Stock Exchange to halt trading of its stock about noon.
In making the request, Beatrice said in a statement that it had been advised by an "investment banker purporting to represent Kohlberg, Kravis, Roberts and Drexel Burnham (a securities broker) about a meeting with Beatrice to propose a leveraged buy-out." It asked for a written proposal but had no comment when Kohlberg, Kravis made its offer public.
Beatrice, which had 109 million shares outstanding as of Oct. 1, has been the subject of takeover rumors on Wall Street over the past two weeks. Trading in the stock has been heavy since Oct. 1, when its price was about $32 a share.
The stock hit a new high of $46 on the NYSE on Wednesday but closed at $44.375, up $2.125. It was the most active stock with a volume of 5.9 million shares.
Some industry insiders believe that the offer will be a combination of $40 cash and $5 in securities. Kohlberg, Kravis has successfully teamed with Drexel Burnham, a pioneer of so-called junk bond--or high-interest, low-rated--financing, in past leveraged buy-outs.
Of the $45 offer, William Maguire, an analyst at Merrill Lynch in New York, said: "I think $47 to $50 would be more adequate."
Beatrice, which had fiscal 1985 sales of $12.6 billion, produces such well-known products as Tropicana fruit juices, Swiss Miss cocoa mixes, Wesson oil and Samsonite luggage. The company has sold off a number of non-food businesses since its acquisition of Esmark.
Separately, Standard & Poor's said it placed Beatrice and its subsidiaries on "creditwatch with negative implications."
The move reflected "uncertainties regarding the future of the company" amid the Kohlberg, Kravis buy-out proposal. S&P; said Beatrice's senior debt is rated A and its commercial paper A-2.
Food companies have been particular takeover targets over the past few months. Philip Morris recently purchased General Foods for $5.64 billion, R. J. Reynolds bought Nabisco for $4.9 billion and Procter & Gamble purchased a controlling interest in Richardson-Vicks, maker of Vicks cold remedies, for $1.2 billion.