Suitors Take Interco Bid to Shareholders

An investor group went directly to Interco Inc.’s shareholders with a $2.69-billion tender offer Monday, a week after the furniture and apparel company rejected the takeover proposal.

Analysts said, however, that the group, led by the Rales brothers of Washington, might have to pay more than the $70-a-share in cash they offered to get a long-sought foothold in the consumer products industry.

The tender offer also put pressure on the Interco board to speed up a restructuring plan that is in the works. In an effort to remain independent, Interco recently strengthened its defenses against unwanted takeover bids and began work on a plan that includes selling the company’s flagging apparel operations and paying shareholders a special dividend.

Analysts said the St. Louis-based company’s apparel operation, which includes the well-known London Fog rain gear line, could fetch as much as $800 million.

The Rales, who have diverse interests in manufacturing and are newcomers to the big-time takeover scene, have said in Security and Exchange Commission documents that they also would sell the unit, as well as other operations, to raise capital for the buyout.

Analysts Differ

The Rales and their associates already own 8.7% of Interco’s 38.4 million shares outstanding. The price tag on the shares they do not already own is about $2.47 billion.

Analysts were divided over whether Interco’s restructuring plan would be attractive enough to keep shareholders from defecting to the Rales.

“The restructuring plan has merit, but I’m afraid it can’t compete with a tender offer,” said Robert Hedrick, a vice president at the investment firm Eppler, Guerin & Turner Inc. in Dallas.

Hedrick said he has valued Interco conservatively at about $70 a share, but some analysts have estimated that Interco might be worth as much as $78 a share.

On Wall Street, Interco stock jumped $2.125 a share to $72.125 in active trading on the New York Stock Exchange.

“People are betting that either a higher offer will come through or management will be able to do something that will cause the stock price to go higher,” said Elizabeth Armstrong, an analyst at Johnson Redbook Service in New York.

Susan Schepman, a spokeswoman for Interco, said the company had no comment.