Cluett Agrees to Acquisition by Pepperell : $375-Million Deal Tops Investor’s Hostile Bid

Cluett, Peabody & Co., escaping the grasp of a California investor, agreed Monday to be acquired by West Point-Pepperell Inc. for $375 million in cash and stock.

Cluett, Peabody, based in New York, is an apparel maker whose lines include Arrow shirts and Gold Toe socks. West Point-Pepperell, headquartered in West Point, Ga., is a major producer of textiles and household fabrics such as sheets and blankets.

The companies said the investor who pursued a hostile acquisition of Cluett, Peabody, Paul A. Bilzerian of Sacramento, agreed to sell the Cluett, Peabody shares held by his investor group to West Point-Pepperell and to drop his tender offer for the remaining stock.

Cluett, Peabody and Bilzerian’s group, which owns about 23.5% of the company’s shares, also agreed to terminate all pending litigation between them.

At the same time, Cluett, Peabody agreed to drop its offer to exchange a package of cash, notes and preferred stock--which it valued at $45 a share--for 26.4% of its common shares. The offer was launched in an attempt to thwart Bilzerian’s bid of $40 a share.

Under the merger agreement with West Point-Pepperell, the textile maker would pay either $41 in cash or a certain amount of common stock, also valued at $41, for each of Cluett, Peabody’s about 8.35 million common shares outstanding.

Stock Prices Mixed

Cluett, Peabody’s common stock rose 75 cents share to $38.125 in New York Stock Exchange composite trading Monday, while West Point-Pepperell’s stock dropped $2.125 a share to $40.875.

Cluett, Peabody also has about 1.26 million preferred shares outstanding, each of which is convertible into 0.63 share of its common stock. West Point-Pepperell said it would pay either $25.83 in cash for each preferred share, or a fraction of its common stock valued at the same amount.

West Point-Pepperell said it also had the right, but not the obligation, to buy 5% of Cluett, Peabody’s common stock in the open market or in private transactions.

West Point-Pepperell said that, if it bought those shares together with the purchase of shares held by the Bilzerian group, about 75% of the remaining Cluett, Peabody shares--assuming full conversion of the preferred stock--would be exchanged for West Point-Pepperell common stock. Each of the remaining 25% of the shares would be exchanged for $41 in cash, it said.

West Point-Pepperell spokesman Donald Downs said the Bilzerian group, which also includes Dallas investor Craig Hall, agreed to sell its 1.95 million Cluett, Peabody shares to the company for cash at an average price of $39.45 a share.

The acquisition is subject to approval by both companies’ shareholders, who are expected to vote on the matter in early January.

Joseph L. Lanier Jr., chairman and chief executive of West Point-Pepperell, would retain those positions after the merger. Henry H. Henley Jr. would remain chairman of Cluett, Peabody and would become a director of West Point-Pepperell.

“We couldn’t be more pleased over this joining of two fine organizations,” Henley said in a statement. “The soft-goods industry’s future lies in the abilities of larger companies to use their efficiency and established brand names to compete successfully in U.S. and world markets. We plan to do just that.”

Sells Bedding, Carpeting

West Point-Pepperell’s sheets and blankets are marketed under such brand names as Martex and Lady Pepperell, and it also sells Cabin Crafts carpets. In its fiscal year ended Aug. 31, the company’s earnings tumbled 49% from the previous year to $28.4 million on sales of $1.2 billion.

Cluett, Peabody’s profit also has been under pressure. In the first nine months of 1985, net income dropped 41% from a year earlier to $13 million on sales of $721.3 million.

But one Wall Street analyst, Edward F. Johnson, said the worst of the recent earnings slide for both companies and other apparel and textile concerns--caused largely by high inventories at the retail level--appeared to be over.

Johnson, director of Johnson Redbook Service, an apparel-textile research unit of the investment firm of Prescott, Ball & Turben, said the acquisition also would allow West Point-Pepperell to diversify its earnings base into an area that faces less pressure from imports than textiles.