Associated Tells Advisers to Find a ‘White Knight’

Associated Dry Goods has agreed to pay its two investment bankers as much as $6 million each if they can find a “white knight” to rescue the New York retailer from the advances of May Department Stores.

In a filing released Wednesday by the Securities and Exchange Commission, Associated said it will pay Goldman, Sachs & Co. and Shearson Lehman Bros. $6 million each if they arrange a merger, the sale of “a significant portion of the company’s assets” or the sale of 50% or more of Associated’s stock.

The investment bankers would receive less if they arrange the sale of less than 50% of Associated stock.

Associated has rejected two takeover offers by May Department Stores and called the offers “inadequate and not in the best interests of shareholders.” May originally proposed a friendly $66-per-share stock swap but followed with a hostile $60-per-share tender offer.

Analysts have speculated that Associated might seek a white knight outside the retailing industry because few within the industry would be interested in such a sizable acquisition and because Associated’s management officials would be more likely to keep their jobs.

A white knight is Wall Street’s description of a company that helps out another firm that is the target of a hostile takeover, either by buying the target company or a large portion of its assets to prevent the unwanted merger.

To fend off May, Associated said it may sell some of its operations and buy back stock. Analysts guessed that J. W. Robinson in Southern California as well as the Caldor and Loehmann’s discount operations might be on the block.

Separately, New York investor Ivan F. Boesky said Wednesday that he and companies that he controls have bought 9.9% of Associated’s common stock “in connection with merger arbitrage and other investment activities.”

The Boesky group said it owns nearly 3.5 million shares, which it bought between May 28 and June 30 at prices ranging between $48.12 1/2 and $65.87 1/2 a share. The day after May announced its merger offer on June 20, the company’s stock price rose more than $18 and has been hovering around $66.

Goldman and Shearson already have earned $750,000 each of the $6-million fees for evaluating the May offers.