Revlon Bows to Suitor in Hostile Fight : Firm Prepares for Orderly Transition to Pantry Pride
Pantry Pride neared victory in its hostile battle to acquire Revlon for $1.65 billion Friday, and Revlon said it was preparing for “an orderly transition” to Pantry Pride ownership.
Pantry Pride emerged the apparent winner of the bitter three-month fight after the Delaware Supreme Court effectively blocked Revlon’s plans to be acquired by Forstmann, Little & Co., an investment firm.
The state Supreme Court upheld a lower court’s rejection of a key defensive tactic that Revlon management tried to use to thwart Pantry Pride and secure the Forstmann, Little deal.
With the defense struck down by the court, Pantry Pride promptly began buying the stock of the cosmetics and health-care concern under a tender offer that expired at midnight EST Friday.
And, in a gesture that the offer would be successful, Revlon said its directors and executive officers would tender their Revlon stock to Pantry Pride.
“It’s a symbol of cooperation between the two companies,” Revlon spokesman Roger Shelley said.
Lock-Up Option Rejected
He also said that talks were being held between Revlon and Pantry Pride “with respect to an orderly transition, which includes the appropriate and proper handling of and planning for our (30,000) employees.”
Pantry Pride, based in Fort Lauderdale, Fla., operates supermarkets and other retail stores and is controlled by the closely held investment firm of MacAndrews & Forbes Holdings.
The Revlon tactic rejected by the Delaware courts was a “lock-up” option that Revlon granted to Forstmann, Little, and merger experts have said the option’s use as a defense in future takeover battles now appears to be severely diminished.
A company grants a lock-up option to protect a merger agreement by giving the friendly acquirer valuable rights to buy company assets, generally at a bargain price, which makes the company a less attractive target to other suitors.
In Revlon’s case, Forstmann, Little had the option to buy two major Revlon divisions for $525 million if an unwelcome suitor acquired 40% of Revlon’s stock.
The option was meant to safeguard Forstmann, Little’s agreement to acquire all of Revlon for $57.25 a share, or $1.63 billion, and to thwart Pantry Pride’s tender offer of $58 for each of Revlon’s 28.5 million shares.
On the New York Stock Exchange, Revlon closed Friday at $57.875 a share, up 62.5 cents, while Pantry Pride gained 62.5 cents to close at $8.125 a share.
Shelley said that the decision was “clearly a disappointment” but that it “should be viewed as a real victory for Revlon stockholders, who have the privilege of tendering their shares today at $58 a share when only a couple of months ago the stock was trading in the high $30s.”
The judge who initially ruled on the lock-up option, Joseph T. Walsh of the Delaware Chancery Court, said the tactic was invalid because it retarded the bidding war for Revlon to the detriment of its shareholders. Pantry Pride had said its tender offer was conditioned on the option being invalidated.
As a result, Walsh said, Revlon’s board “failed in its fiduciary duty to the shareholders.”
