Calny Agrees to New Pepsico Bid of $36.17 Million

Calny, which spurned an $11.50-a-share offer from Pepsico last spring, agreed Tuesday to be acquired by the nation’s No. 2 soft drink firm for 50 cents less per share.

William Ahearn, chief financial officer of San Mateo-based Calny, said the recent decline in the stock market made the renewed bid look attractive. Additionally, he said, Pepsico had boosted its stake in Calny to 31.5% from 9.9% last spring, and showed a willingness to buy even more shares in the open market at prices well below $11 apiece.

“We decided that it was in the best interests of the shareholders to negotiate,” said Ahearn. Pepisco will pay $36.17 million for the 3.29 million shares it doesn’t own.

Calny is the largest franchise operator of Pepsico’s Taco Bell fast-food restaurants. Calny operates 142 Taco Bells in California, Oregon, Texas and Washington state. There are about 2,500 Taco Bell restaurants nationwide, of which about 50% are owned by Pepsico.

Calny shares closed Tuesday at $10.25, up $1.125, in over-the-counter trading.

Pepsico’s initial offer for Calny came as the franchisee finished one of its worst year’s ever. Calny reported a loss for fiscal 1987 of $6.45 million on revenue of $77.47 million due to writedowns on its money-losing Seattle operations, which consists of 15 La Petite Boulangerie bakeries and 26 Taco Bell restaurants.

Since then, however, Calny’s finances have improved. The company reported earnings of $769,000 on $21 million in revenue for the second fiscal quarter that ended on Aug. 11. It earned $486,000 on revenue of $18.6 million for the same period in fiscal 1986.

Ahearn said Calny is in negotiations to sell its Seattle operations, although he didn’t know whether Pepsico would go ahead with a sale of the Taco Bell restaurants. James N. Griffith, a Pepsico spokesman, said it was “premature” to discuss the Purchase, N.Y.-based company’s plans.

The acquisition, if completed early next year as expected, would end a $5-million lawsuit filed by Calny against Pepsico in San Mateo County Superior Court in early March.

The lawsuit alleged that Pepsico didn’t support the La Petite Boulangerie bakery franchise and accused the soft drink maker of misrepresenting the costs of operating the restaurants.