3 Months of Sparring May Soon End : Batus Offers to Raise Farmers Bid, Open Talks
Batus Inc. expressed willingness Tuesday to boost its bid and open takeover talks with Farmers Group, an insurance holding company based in Los Angeles.
Patrick Sheehy, chairman of London-based BAT Industries and its U.S. subsidiary Batus, accepted an invitation issued Monday by Farmers Group Chairman and Chief Executive Leo E. Denlea that the two sides finally meet after three months of sparring.
Farmers, the nation’s third largest and California’s second-largest home and auto insurer, had previously refused to discuss Batus’ $4.5-billion offer.
Sheehy confirmed that he would be willing to increase Batus’ $63-a-share offer, as he had hinted twice last week, but objected to a secrecy agreement that Farmers wants him to sign before sharing confidential business information with Batus.
In a statement issued by Batus, Sheehy said that while Batus was willing to keep secret any non-public information received, he had asked Farmers for revisions to the agreement.
The British executive expressed reservations that the agreement as framed by Farmers might place “unreasonable restrictions” on the ability of Batus to launch another hostile takeover effort if friendly negotiations break down.
Both Batus and Farmers refused Tuesday to release copies of the disputed agreement.
But Frederick T. Sandburg, an insurance industry analyst in Chicago with Legg Mason Wood Walker, said it was not surprising that Sheehy was paying close attention to legal niceties before signing any papers. “It’s just making sure that you’re not tying your hands,” he said.
Sandburg said he thought Farmers shares are worth $70 to $75 apiece, but declined to speculate on whether Batus’ next offer would go that high.
Shares in Farmers Group closed up 12.5 cents at $65 on Tuesday, in heavy over-the-counter trading of 1.9 million shares. Investors already bid up the stock by $2 on Monday in anticipation of a higher offer from Batus.
Denlea had challenged Sheehy on Monday, “to state unequivocally that Batus is, in fact, prepared to offer a higher price and, if so, what that price is.”
But the Batus statement Tuesday noted only that the company, “would be prepared to pay a price higher than $63 per share in cash in a friendly negotiated transaction.”
Headquartered in Louisville, Ky., Batus is best known in Southern California as the parent of Saks Fifth Avenue, a high-fashion department store chain, and Breuners, a 50-store furniture retailer based in San Ramon, Calif. Another Batus subsidiary, Brown & Williamson Tobacco Co., makes Kool, Viceroy, Barclay and Raleigh cigarettes.
Other subsidiaries include Marshall Field department stores and a specialty paper goods producer that makes carbonless paper for credit card purchases. Batus recently reported that it earned $886 million before taxes on sales of $5.8 billion last year.
Including Batus, BAT Industries reported earnings of $1.4 billion on sales of $31.8 billion. Formerly known as British American Tobacco, the conglomerate owns two large insurance companies in Great Britain, Eagle Star and Allied Dunbar.
