Black & Decker Corp. turned up the heat in its hostile bid for American Standard Inc. on Tuesday, raising its offer to $68 from $65 per share and promising court action to block its target's recapitalization plan.
The latest offer from Black & Decker--worth about $2.11 billion, up from $2.03 billion--surprised some analysts, who said the price was becoming inflated.
But other observers had expected Black & Decker to raise its bid or drop its takeover attempt entirely after American Standard announced Monday that it had financing commitments for a recapitalization aimed at thwarting the hostile bid.
The latest bid, which would expire at midnight EST March 7, is the third that Black & Decker has made for American Standard since late January. The initial tender offer was at $56 per share.
Towson, Md.-based Black & Decker, a maker of power tools and household appliances, had said previously that it would not go above $65 per share unless it was allowed to examine American Standard's books.
American Standard has rejected both previous offers as inadequate. The New York-based plumbing, heating and air conditioning manufacturer urged its shareholders Tuesday not to tender their shares under the latest bid until it was reviewed by directors.
American Standard stock rose 12.5 cents to $68.25 a share in New York Stock Exchange trading, while Black & Decker dipped 12.5 cents to $19.375.
In a news release, Black & Decker said that it also intended to file counterclaims in federal court in Delaware seeking to invalidate American Standard's "poison pill" takeover defense and to halt any action on the recapitalization.
The $2.1-billion recapitalization plan would make American Standard less attractive as a takeover target by boosting its long-term debt to more than $2 billion and sharply increasing its outstanding shares and equivalents, such as stock options.
American Standard, which is incorporated in Delaware, had asked the federal court to validate its poison pill, which is designed to make a takeover prohibitively expensive by diluting the target company's stock. The court last week rejected Black & Decker's attempt to block American Standard from seeking such a ruling.
Black & Decker also has challenged Delaware's new anti-takeover law as unconstitutional.
In addition, Black & Decker is awaiting regulatory approval to begin a maneuver similar to a proxy fight to oust American Standard's directors. If successful, Black & Decker could repeal the recapitalization and the poison pill.
In a statement Monday, American Standard had disclosed $1.84 billion in financing commitments from Chemical Bank, Citibank NA, Manufacturers Hanover Trust Co. and Sumitomo Bank Ltd.
Analysts said the commitments cleared away a major hurdle to completing the recapitalization.
The recapitalization plan would pay stockholders $59 a share in cash plus the equivalent of $5 in "junk bonds," along with stock in the recapitalized company. The plan still needs shareholder approval.
Analysts had said Black & Decker could win support by boosting its all-cash bid to somewhere around $70 a share, which would be viewed as slightly more lucrative than American Standard's offer of cash, stock and debt securities.
Guy Nielsen of Brown Bros. Harriman and Co. in New York said the price "already is a bit on the rich side."
"They (Black & Decker) obviously see something I don't see," he said. "The bidding has gotten to the point where I can't justify the $68 price."