Marriott Begins Public Tender Offer for Saga
Having been spurned in a friendly attempt to acquire Saga Corp., Marriott Corp. launched a public effort Monday to buy all of the stock of the Menlo Park restaurant and food service company for $34 a share--the same price that Saga ignored last week.
Proxy material mailed to Saga shareholders also disclosed Monday that Marriott quietly has been pursuing a merger since last month, when the chairmen of the two companies met. But Saga officials so far have resisted increasingly insistent efforts by Marriott.
Monday’s $435-million tender offer by Marriott came exactly one week after Saga’s board failed to respond to a May 12 deadline set by the hotel chain. Since Marriott’s first $34-a-share offer, the stock price has soared to more than $37 a share.
Seriousness of Offer
“The fact that they actually went to the public with a tender offer indicates the seriousness of the matter even though it was $3 below the market” price for Saga, said Joseph J. Doyle, an analyst at Smith Barney, Harris Upham & Co. in New York.
Saga’s stock was trading at $29.50 a share when Marriott made its first offer on May 7. It closed Monday on the New York Stock Exchange $37.37 1/2, up 50 cents. Marriott was down $2.50 a share to $167.
The California firm runs the nation’s largest food service operation serving colleges and universities and owns the Stuart Anderson’s, Straw Hat Pizza and Velvet Turtle restaurant chains. Its restaurants and food service group fits well with Marriott, which also has major food service and restaurant operations in addition to its hotels, analysts say.
On Monday, Saga’s tight-lipped spokesman would only say that the board of directors is expected to meet “in the near future to consider the Marriott offer and other alternatives available to the company.”
Speculation on ‘White Knight’
Analysts speculated that Marriott renewed its offer at $34 a share in hopes that Saga will not find a “white knight” who would be willing to pay a price closer to the $40 a share.
The offer is not conditioned upon any minimum number of Saga shares being tendered. It expires June 16 with withdrawal rights set to expire June 9.
In proxy materials mailed to Saga shareholders, Marriott disclosed that its chairman and chief executive, J. W. Marriott, first raised the prospect of a merger at $30.50 a share with Saga President and Chief Executive Charles A. Lynch at a meeting on April 24.
In a May 1 telephone conversation with Marriott, Lynch said that the $30.50 offer was too low and that the Saga board, while not making a determination to sell the company, had instructed its investment banker, Goldman, Sachs & Co., to determine the interest of “selected third parties.”
Marriott made its $34-a-share offer on May 7.
