Beatrice Will Discuss KKR Bid; to Weigh Alternatives
Beatrice Cos. agreed Thursday to discuss a New York investment banking firm’s $5.1-billion bid for the food and consumer products company but added that it will explore alternatives.
The company issued the statement after a board meeting in Chicago where directors were considering a sweetened proposal by Kohlberg Kravis Roberts & Co. of $47 a share for Beatrice common stock, to be paid as $40 in cash and $7 in preferred stock for each of Beatrice’s 109 million outstanding shares.
Kohlberg Kravis specializes in leveraged buy-outs, in which investors buy a company by borrowing against its assets. The firm had no comment Thursday on the Beatrice statement.
Beatrice’s response indicated that the company is grappling with the possibility that it might not be able to remain independent. The company, which has suffered recently from the exodus of many key managers and the massive debt from its 1984 acquisition of Esmark, has nonetheless been considered a takeover target.
William W. Granger Jr., chairman of Beatrice, said in the statement: “The board is recognizing the realities of the situation forced on Beatrice by the unsolicited proposal . . . the unusual trading in Beatrice stock in recent months and the large accumulation of Beatrice shares by institutions, arbitrageurs and speculators.”
He added that “there is no assurance that a transaction that meets the board’s criteria will, in fact, be developed with KKR, or anyone else, and it should not be assumed that Beatrice will enter into any such transaction at this time.”
The price of Beatrice’s stock has risen about 50% from $30 a share in July solely on the basis of takeover talk, analysts noted. The stock fell off this week when it appeared that the Kohlberg Kravis offer was headed for certain rejection, but it recovered Thursday, rising $1.75 a share to $44 on the New York Stock Exchange with more than 5 million shares trading hands.
Analysts agreed that Beatrice was duty bound to consider the Kohlberg Kravis offer or face the wrath of shareholders. On Oct. 20, it rejected the investment firm’s $45-a-share offer.
Marvin B. Roffman, an analyst at Janney Montgomery Scott in Philadelphia, said: “They have a fiduciary responsibility to make sure that the shareholders are protected. You just can’t dismiss something and say it’s not rich enough. They’re subject to shareholder suits if they turn the deal down and the bid is withdrawn and the stock falls precipitously.”
To George V. Novello, an analyst at E. F. Hutton in New York, the rise in Beatrice’s stock price Thursday indicated that “the Street might be interpreting this as a willingness to sit down and negotiate and strike an arrangement.” He added: “I’ve gotta believe Beatrice has already investigated alternatives eight ways to Sunday” and has rejected them as impractical.
