Carter Hawley Files Lawsuit to Block Limited-DeBartolo Group’s Takeover Attempt
In an action reminiscent of its 1984 takeover defense, Carter Hawley Hale Stores said Wednesday that it has filed suit in federal court seeking to block the latest buyout effort involving the Limited.
Separately, the Los Angeles retailer’s board said it ended its regularly scheduled meeting without reaching a decision on the $1.77-billion, or $55-a-share, tender offer. The board has until Dec. 12 to respond.
Carter Hawley’s lawsuit, filed late Tuesday in U.S. District Court in Los Angeles, contends, among other things, that a tender offer begun Monday is illegal and that the tender offer materials contained “false and misleading statements” and concealed material information from shareholders.
The action further alleges that individuals associated with developer Edward J. DeBartolo Sr. or his firm, the Limited’s partner in the takeover effort, violated securities laws by acting on non-public information when they purchased shares of Carter Hawley stock less than 60 days before the offer was made.
Reached in New York, Alfred S. Dietzel, a Limited vice president, characterized the lawsuit as “a knee-jerk reaction.”
“It’s a routine lawsuit and frankly not unexpected,” he said. “And with that done now, we hope that we can get down to business. We have made a full and fair, all-cash offer. We hope that the board of Carter Hawley will focus on the substance of our offer and the potential to create a new force in American retailing. We are prepared to conclude an amicable transaction during the current tax year.”
Defendants in Suit
Among the defendants named in the suit are the partnership, called Retail Partners; related companies, and two individuals--Limited Chairman Leslie H. Wexner and Edward J. DeBartolo Sr.
The suit, which seeks an injunction against the tender offer, has been assigned to Chief U.S. District Judge Manuel Real. No hearing date has been set.
Among those attending the Carter Hawley board meeting was J. Atwood Ives, vice chairman of General Cinema, the company that rescued Carter Hawley from the Limited in 1984 by buying a large stake. General Cinema has seven representatives on Carter Hawley’s 22-member board.
General Cinema, which owns preferred shares convertible into a 38.6% stake of Carter Hawley common, is a key player in the takeover drama. It has said it would not go along with the current offer.
Tender offer documents filed Monday by Retail Partners indicate that certain associates or related companies bought a total of about 546,000 Carter Hawley shares between Oct. 23 and Nov. 14 at prices of between $34.34 and $49.63. Carter Hawley contends that some of those purchases were made in violation of federal securities laws for the individuals’ “own personal profit.”
Hefty Increase
Since Nov. 24, the day before the Limited and DeBartolo made public their intention to tender for Carter Hawley, the stock has risen from $43.25 to a $55 close on Tuesday. In trading Wednesday on the New York Stock Exchange, the shares closed down $1.875 to $53.125.
Observers indicated that the lawsuit was to be expected, especially in light of the history between Carter Hawley and the Limited, which 2 1/2 years ago failed in a bitterly contested effort to take over the parent company of such prominent stores as the Broadway, Neiman-Marcus and Bergdorf Goodman.
Last time around, Carter Hawley quickly filed suit to block the Limited’s $1.1-billion takeover bid. That suit also alleged that the Limited violated federal securities laws by making false and misleading statements.
“Lawsuits such as this are quite common and often don’t amount to much,” said Edward Weller, an analyst at Montgomery Securities in San Francisco, of the latest action. “They’re frequently a delaying tactic.”
Analysts had expected that Carter Hawley would marshal its defenses once again to attempt to remain independent of a suitor that has nearly tripled in size since its previous effort. The Columbus, Ohio, company operates more than 2,500 specialty stores under such names as Limited, Limited Express, Victoria’s Secret and Lane Bryant.
Carter Hawley also complained in the lawsuit that Retail Partners changed its terms between preliminary communications and the tender offer. “Gone from the landscape was their professed desire to preserve the continuity of CHH’s business and their management,” the suit alleges. “In its place was a plan to divide up CHH’s prized department store chains between Wexner (and) DeBartolo.”
In documents filed with the SEC, Retail Partners indicated that the Limited and DeBartolo were interested in buying certain divisions for themselves. The documents show that the Limited, for example, would be interested in Carter Hawley’s specialty store businesses--Neiman-Marcus, Contempo Casuals and Bergdorf Goodman--for “a price of not less than $750 million,” whereas DeBartolo would want the Thalhimers department store division, based in Richmond, Va., for “not less than” $200 million.
In its suit, Carter Hawley contends that, before Oct. 10, defendants Wexner and DeBartolo developed a plan to gain control of Carter Hawley through stock acquisitions. However, the partners did not formally announce their intentions until Nov. 24 in letters to Carter Hawley Chairman Philip M. Hawley.
