$4-Billion Buyout Is Announced for Southland Corp. : 7-Eleven Founder’s Family Wants to Take Firm Private

A frequent subject of takeover rumors, Southland Corp., unveiled on Sunday a $4-billion leveraged buyout deal with top management from the family that founded its national 7-Eleven chain.

The Dallas company, the biggest U.S. operator of convenience stores, said it expects a two-step transaction to begin today with a cash tender offer.

The offer is to be $77 a share for 31.5 million of its 48.8 million outstanding common shares and $90.27 a share for all 2.5 million of its convertible preferred stock. The $77 offer is about 11% above the present market level.

Some $2.73 billion of bank financing and $600 million of “bridge” or interim financing has been committed, the firm’s announcement said, and the buyers have received assurances that the rest can be raised.

If the tender succeeds, the announcement said, each remaining common share would be converted into the right to receive $61.32 cash and $15.68 in exchangeable preferred stock of Southland, the company said. Each remaining convertible preferred share would be converted into the right to receive $90.27 cash.

Stock Price Had Surged

The company’s stock price had leaped $8.875 a share to $64.75 in one day, June 16, on the New York Stock Exchange. The surge, on heavy volume, was followed by slow gains in the succeeding days to as high as $69.50. However, it receded slightly and closed Thursday at $68.50, the same price as it finished the previous week.

Somewhat surprisingly, Southland’s announcement, which was made near the end of the three-day holiday weekend, made no reference to any takeover threat or any other reason for taking the big firm private at this time.

However, Southland had said in commenting on the heavy market activity in its stock on June 16: “Like many other companies whose stock is the subject of takeover rumors and has been actively traded, the company has been studying with its advisers various strategic and financial alternatives available to it.”

A company spokeswoman working Sunday at Southland headquarters said she could not comment beyond the announcement.

Family Control a Priority

Securities analyst Edward G. Gagnon of Rauscher Pierce Refsnes in Dallas said Sunday in a telephone interview that it is clear to him and others who follow the company that a major priority of the founding Thompson family is to retain control of the business it built. Insiders presently hold about 15% of the common stock and institutions are believed to hold more than 50%.

Noting that various names of potential suitors have surfaced in recent months, Gagnon said the heavy trading could be concealing quite a few accumulations below the 5% level requiring disclosure. No parties have publicly disclosed intentions of seeking control.

As for the chances of the leveraged buyout succeeding, the analyst said the $77 price is “fairly attractive” and would appear to have a good chance of garnering the lion’s share of the stock quickly in the tender offer.

Gagnon said that the Southland management historically has been very astute in its financial dealings and, therefore, is likely to have obtained favorable financing terms and tailored the deal to obtain a favorable reaction from institutional shareholders.

The announcement said Southland and an affiliate of the Thompson family had entered into a definitive merger agreement and that Southland’s board has unanimously approved it.

Family Involved

JT Acquisition, the acquiring entity, is headed by Southland Chairman John P. Thompson and President and Chief Executive Joe C. (Jodie) Thompson Jr., a Southland director. All are sons of Southland founder Joe C. Thompson Sr. The brothers and other family members own the Thompson Company, a private investment firm, which formed JT Acquisition.

The announcement said the tender offer will be conditioned on receipt of 31.5 million common shares and 1.3 million convertible preferred shares being validly tendered and not withdrawn before the July 31 scheduled expiration.

A special committee of all of Southland’s outside directors reviewed and recommended the transaction, the announcement said. It said the special committee was advised by Lazard Freres & Co. that, in its opinion, the offer is fair to the public shareholders.