Chesebrough-Pond’s May Fight Bid : Analysts Expect Actions to Fend Off American Brands

Analysts said Wednesday that while American Brands’ unsolicited offer to acquire Chesebrough-Pond’s for $2.8 billion was attractive, there was a good chance that the approach might be resisted.

Meanwhile, Greenwich, Conn.-based American Brands said it had a definitive agreement with a group of banks to provide $3 billion in financing for the purchase.

Chesebrough-Pond’s reported Tuesday that it had received an offer from the diversified consumer products company to pay $66 a share for its roughly 42.6 million outstanding common shares.

In response to the bid, Chesebrough-Pond’s stock soared $12.50 a share to $61.50 on heavy volume in New York Stock Exchange composite trading Wednesday. American Brands’ stock climbed $1.75 a share to $46.

Chesebrough-Pond’s said it had retained legal advisers to evaluate the offer and “other alternatives to maximize shareholder values.” On Wednesday, the Westport, Conn.-based company said it had no further comment.

“It’s a very fair offer for the company, and Chesebrough-Pond’s doesn’t have any anti-takeover provisions,” said Deepak Raj, a cosmetics analyst with Merrill Lynch. “I think Chesebrough-Pond’s will look at all its options to remain independent.”

“They could buy stock back, although the book value is low,” Raj added. “They can sell divisions, but that would make them even more attractive. I think they will try to fight it, but their options are limited.”

Raj said that although anti-takeover provisions don’t always stop a takeover, they at least create “legal roadblocks and buy the target company some time.”

Raj said the offer doesn’t “seem like a very friendly bid,” adding that American Brands might be trying to stay independent itself.

Eileen Gormley, a securities analyst with Thomson McKinnon, said that when Chesebrough-Pond’s acquired Stauffer Chemical for $1.2 billion in March, 1985, the company had incurred an amount of debt that made it less attractive for a takeover. But she said Chesebrough-Pond’s had paid down much of its debt since then.

When Chesebrough-Pond’s purchased the chemical company, analysts speculated that it was an effort to protect itself from takeover threats. Earlier this month, Chesebrough-Pond’s sold part of the chemical products group, saying it wanted to focus on what it considered its core businesses.