Dainippon Ink Makes $473-Million Bid : Reichhold Chemicals Stock Soars After Offer

The stock price of Reichhold Chemicals soared Thursday following announcement of an unexpected $52.50-a-share cash tender offer for the company by Japan’s Dainippon Ink & Chemicals.

After a delayed opening, the stock of Reichhold, a specialty chemicals company based in White Plains, N.Y., jumped $18.25 to $60.50 on the New York Stock Exchange, indicating that the market was betting a higher bid could emerge.

Reichhold has about 7.45 million common shares outstanding. Dainippon said the conversion of options and convertible debentures into stock would increase the number of common shares to about 9.01 million, giving its offer an indicated value of $473 million.

Dainippon, a diversified chemical company, said it owned about 4.5% of Reichhold’s common stock. After completion of the tender offer, Dainippon plans to propose a merger in which it would convert remaining Reichhold shares outstanding into the right to receive $52.50 cash.

Reichhold issued a statement calling the offer “unexpected” and advised shareholders not to tender their stock until the company’s board had studied the offer and made a recommendation.

The offer, which expires July 23 unless extended, was conditioned on a majority of Reichhold shares being tendered and on the Reichhold board revoking “poison pill” defenses.

Dainippon also filed a lawsuit in Delaware Chancery Court to invalidate the takeover defenses or force Reichhold, which is incorporated in Delaware, to revoke them.

Dainippon disclosed in the suit that the two companies had held discussions about a possible merger, and on June 9 Dainippon had indicated that it was ready to make a buyout offer of $50 a share, which at the time was 37% over the stock’s market price.

Reichhold rejected the offer and refused to meet with Dainippon to discuss it, Dainippon contended.

Dainippon last year unsuccessfully bid for Sun Chemical Corp. before Sun merged with Chromalloy American Corp. Dainippon later bought Sun’s graphics materials group for $550 million.

The company said it had sales of $2.6 billion in the year ended March 31.

Reichhold posted a profit of $3.39 million, or 46 cents a share, in the three months ended March 31, compared to $1.27 million, or 17 cents a share, a year earlier. Earnings included a gain of about $900,000 from the sale of its Sterling unit in Canada and its Specialty Esters unit in the United States.

Revenue for the quarter fell to $183.8 million from $209.7 million.