Campeau Adds to Financing for Federated Bid : Court Rejects Effort by Chain to Block Takeover
The Canadian developer seeking to take over Federated Department Stores disclosed Thursday that it has lined up additional financing for its $5.5-billion bid for the retailing chain.
In addition, the developer won a legal skirmish in federal court with Federated, the owner of Ralphs Grocery and Bullock’s department stores.
The moves come as developer Campeau Corp. continues to pressure Federated to consider its $61-a-share buyout offer. Federated, for its part, is said to be considering a variety of responses, including the sale of Ralphs, its other divisions or the entire company.
“We continue to hear market rumors regarding impending ‘defensive’ actions to be taken by you,” developer Robert Campeau said in a letter to the chairman of Federated, Howard Goldfeder. “We urge you not to enter into extraordinary corporate transactions, such as a recapitalization or sale of blocks of stock or significant assets, or agree to significant fees or so-called lockup or breakup arrangements, without giving us a full and fair opportunity to compete with any other such transaction.”
Federated Shares Up
The legal victory for Campeau came when a federal judge rejected Federated’s motion to dismiss Campeau’s challenge to its takeover defenses, and the federal government indicated that it might intervene in the case.
The Securities and Exchange Commission, which submitted a brief Thursday supporting Campeau’s right to file suit against the Delaware anti-takeover law, also indicated that it might express an opinion on the merits of the suit itself.
Federated shares jumped $2.375 to $59.875 a share Thursday on the New York Stock Exchange.
U.S. District Judge Leonard B. Sand had asked the SEC for comment in deciding on Federated’s motion to dismiss Campeau’s challenge of the Delaware law. Federated contended that Campeau had no standing to make the constitutional challenge because it did not have assured financing for its hostile takeover bid.
But the SEC said “the substantial efforts and expenditures” undertaken by a party making a tender offer satisfied the requirement that a party have a “personal stake” in an issue in order to have standing to sue.
Considered Significant
The brief also stated that Campeau could suffer “substantial injury” if forced to wait for assurance of financing before pressing its lawsuit and such assurance would do little or nothing to clarify the constitutional issues in the case.
Cincinnati-based Federated is incorporated in Delaware. Campeau had filed suit challenging the takeover law as an unconstitutional interference with interstate commerce and an infringement on federal regulatory authority.
The law is regarded as significant because of the thousands of major companies that have incorporated in Delaware. Black & Decker Corp., which has a $2.03-billion hostile offer outstanding for American Standard Inc., also has challenged the law.
Eric Summergrad, the SEC assistant general counsel, said in Washington that the agency’s staff also was considering a similar “friend of the court” brief addressing the actual issues raised by the suit. He said a decision on whether to file such a brief should be made in the next two weeks.
Campeau on Wednesday disclosed that it had agreements for $660 million in financing for its $5.5-billion offer. Federated has said it would discuss that offer, which was applicable only in a definitive merger agreement, if Campeau showed it had enough financing to complete the buyout.
Ohio shopping center developer Edward J. DeBartolo, who helped finance Campeau’s $3.5-billion buyout of Allied Stores in 1986, agreed to lend $400 million. The Reichmann family of Toronto, which controls Olympia & York Developments Ltd., a major Campeau shareholder, agreed to buy $260 million in new Campeau shares.
On Thursday, Campeau further disclosed that it had commitments for $200 million of a planned $500-million bank loan facility being arranged by Bank of Montreal and Banque Paribas and a commitment for a $100-million short-term “bridge” loan from First Boston Corp. First Boston also indicated that it was highly confident it could raise up to $1 billion in subordinated debt to finance the merger.
Campeau also said that “Security Pacific National Bank has committed $500 million to the transaction and has advised us that it is highly confident that commitments can be obtained for the balance of the required bank financing.”
Also on Thursday, the Ohio House approved one of two bills passed by the state Senate to help Federated thwart the Campeau bid but abandoned the other because of questions about its constitutionality. The state House passed and sent to Gov. Richard F. Celeste a Senate proposal aimed at aiding Federated. The bill would require non-U.S. companies trying to acquire an Ohio business to disclose financing plans and any intent to sell the target company’s assets to pay for the acquisition.
