American Brands Trying ‘Pac Man’ Defense on E-II

The sudden move by American Brands Inc. to acquire its hostile suitor E-II Holdings Inc. marks a rare use of the controversial “Pac Man” takeover defense, and some analysts said that it might work.

American Brands, a consumer products company based in Greenwich, Conn., on Friday began a $13-a-share tender offer for all of E-II’s 61.8 million common shares outstanding, a deal worth about $805 million.

On Friday, American Brands’ stock closed at $47.37, up 61 cents, on the New York Stock Exchange. E-II’s stock closed at $12.37, up 61 cents.

The takeover move came two weeks after Chicago-based E-II, a diversified consumer products concern, indicated that it might try to take over American Brands by gaining control of the company’s board in a shareholder vote.

“I think American Brands has blood in their eyes,” said Roy Burry, senior vice president of research at Kidder, Peabody & Co. in New York. “They’re going right after E-II, and I think American Brands is going to win.”

The Pac Man defense is named after the popular video game, in which a player tries to swallow his enemy before being eaten himself. It earned a reputation on Wall Street as a risky and costly defense during its last major use in the 1982 takeover fight between Martin Marietta Corp. and Bendix Corp.