Interco Gets $2.46-Billion Buyout Offer : Investment Group Says It May Sweeten Proposal
Interco Inc., a diversified shoe and clothing company that owns Florsheim shoes and London Fog rainwear, said Thursday that it received a buyout proposal from an investment group, valuing the company at $2.46 billion.
The group, City Capital Associates LP of Washington, said in a disclosure statement that it would also consider raising its offer of $64 a share under certain conditions.
Shares of Interco soared to close $8.75 higher at $67.875 on the New York Stock Exchange as investors saw a battle looming between the company and City Capital.
Headed by Stephen and Mitchell Rales, a takeover team that has scored a number of buyout coups in recent years, City Capital said it already owns 8.7% of Interco’s shares.
In 1986, using their holding company, Danaher Corp., an auto parts and instruments company, the team took over Chicago Pneumatic Tool and Western Pacific Industries, two industrial concerns.
Wide Holdings
“They’ve had two successful deals so far,” said one arbitrager. “They’re well connected. The company will have to come up with a pretty good price (in a counteroffer) to fight them.”
In a statement to financial regulators, City Capital said it would likely sell the apparel division assets of the widely diversified company whose holdings range from Ethan Allen furniture to Converse tennis shoes.
Interco itself said recently that it was examining a restructuring involving its apparel division but has given no specific plan. Analysts said it has wide flexibility to maneuver with stock buybacks or dividends to avoid a takeover because it has a relatively low debt level and many assets it can sell.
“I think the company is going to resist this very strongly,” said Laurence Day of Newhard Cook & Co. “They might push an LBO (leveraged buyout offer taking the company private).”
Lawsuit Filed
City Capital said it hopes to “proceed harmoniously” by enlisting company managers as participants in a buyout. The group said it is attempting to meet with Interco, hoping to gain access to confidential information that could justify a higher bid.
But while talking about a friendly buyout, the group also said it has filed a lawsuit against the company in Delaware chancery court aimed at voiding a “poison pill” that could raise the cost of taking over the company. The suit also charges Interco with alleged financial reporting deficiencies and seeks to void any Interco restructuring plan.
Interco, formerly known as International Shoe Co., on July 15 said it would launch the restructuring aimed at reshaping a company whose earnings and sales have been stagnant for five years despite efforts to grow through acquisitions.
Interco has more than 40,000 employees at about 100 manufacturing and 1,000 retailing sites, with annual sales of around $2.5 billion.
