Perelman Puts Video Unit to Work : Corporate Raider Plans to Use Assets for Acquisition
New York corporate raider Ronald O. Perelman, who has been selling off the assets of Burbank-based Compact Video for the past three months, plans to use the company to raise $740 million for a major acquisition.
Perelman, who is chairman of Compact Video, disclosed his intentions in filings with the U.S. Securities and Exchange Commission and suggested that acquisition could involve an expensive legal battle, but he did not say what company he intends to acquire.
Analysts on Wall Street are speculating that it could involve another try for Gillette Co., the Boston-based maker of razors and personal-care products, or perhaps for Salomon Inc., parent of the New York brokerage Salomon Bros.
“My guess is he already has an acquisition in the hopper,” said one analyst.
Gary Shemano, senior managing director in San Francisco of the investment firm of Bear, Stearns & Co., said he believes that Perelman will definitely acquire a big consumer products firm. “That is my speculation,” he said.
In the SEC filing, Perelman warned shareholders that the company may encounter steep legal expenses if he launches a hostile takeover as part of the acquisition. He also told stockholders that the company will change its name to Owens Group Inc.
Perelman, whose middle name is Owen, owns approximately 41% of Compact Video through his investment firm, MacAndrews & Forbes. The company is Compact Video’s largest shareholder.
In September, Perelman announced plans to acquire up to 25% of Salomon through another of his holdings, the New York-based cosmetic giant Revlon Group. Salomon spokeswoman Caroline Davenport declined to comment on rumors that the company was a takeover target, but she did report that there was a lot of interest in the company in the past couple of days. “There has been unusually high volume in our stock,” said Davenport.
Trying for 2 Years
Salomon was hard hit by Black Monday--in October the troubled brokerage lost $75 million in aftertax earnings. It shut down its municipal securities department, an area in which Salomon had been a leader.
As for Gillette, Perelman has repeatedly tried to gain control of the company during the past two years, despite an agreement he signed promising not to. In June of last year, Perelman offered Gillette shareholders $40.50 a share for the company. In trading Wednesday, Gillette stock closed at $39.50. Gillette spokesman David Fausch refused comment on takeover speculation.
Compact Video’s stock has risen on the takeover speculation from $3.50 in mid-January to close Wednesday in over-the-counter trading at $5.50 a share.
Compact Video officials in Burbank refused all comment, and Perelman was unavailable for an interview to discuss his intentions. But a spokeswoman said he may reveal more of his plans Friday, when Compact Video holds its annual shareholders meeting in New York.
“It is going to be a well-attended show,” one analyst commented.
Three years ago, Perelman bought a controlling interest in Pantry Pride, a Florida-based chain of supermarkets. He quickly sold off the company’s only business--grocery stores--and then used Pantry Pride’s $400 million of tax credits and the proceeds from the sale to acquire Revlon, where he is now chairman and CEO.
Perelman is running the same kind of garage sale at Compact Video. Since December, he has announced plans to sell virtually all of the diversified video company’s assets including a national drugstore chain and several video subsidiaries.
In a Feb. 12 filing with the SEC, Perelman said Compact Video will become a shell company that will receive about $138 million for most of its subsidiaries, $105 million of that in cash.
For the nine months ended Sept. 30, Compact Video lost $13.8 million, or $2.10 cents a share, on revenue of $318 million. A year ago, the company had approximately 3,000 full-time employees and 3,200 part-time employees.
The only subsidiary that has not been sold is Four Star International in Los Angeles, which distributes television shows and owns roughly 600 low-budget movies. Perelman said in the SEC filing that he is looking for somebody to buy it.
On Friday, Perelman will ask shareholders to authorize an additional 80 million shares of Compact Video stock be added to the 20 million currently available for issuance. The company has about 6.6 million shares outstanding.
Besides holding a new public offering of stock, Perelman revealed in the SEC filing that he intends to raise another $600 million by selling bonds and notes.
The brokerage of Drexel Burnham Lambert will underwrite at least a portion of the financing, said Drexel spokesman Steven Anreder.
