Polaroid Rejects Shamrock Bid, Says It May Sell Stake to Others

Polaroid’s directors urged shareholders Tuesday to reject a hostile takeover bid of at least $2.4 billion from Roy E. Disney’s Shamrock Holdings and also disclosed that they may sell a minority stake in the company to unnamed third parties.

The rejection of the offer by the Cambridge, Mass., instant photography company was expected. But the disclosure that Polaroid has started preliminary negotiations to sell a stake in itself, which would likely kill the bid by Burbank-based Shamrock unless it was successfully challenged, was a surprise.

In disclosing the information in filings with the Securities and Exchange Commission, Polaroid said it may issue preferred or common stock to parties that would gain a “minority, non-controlling interest” in the company. It said none of the proposals being discussed include mergers or changes in control or would result in Polaroid becoming a private company.

Vows to Fight

Polaroid did not disclose names of interested parties. But traders and analysts speculated that it might be Fuji Photo Film, the giant Japanese film company, or Lazard Freres & Co., a Wall Street investment banking firm that raised nearly $1.6 billion this summer to buy friendly, minority stakes in takeover targets.

In a letter to Polaroid directors, Shamrock President Stanley P. Gold vowed to fight any attempt by Polaroid to place stock in “friendly” hands, saying it “will not achieve its purpose since it will not divert us from our efforts to acquire Polaroid.” He also criticized the company for giving Polaroid Chairman I. MacAllister Booth and 18 other executives more lucrative “golden parachute” severance agreements.

Shamrock is owned by the family of Roy E. Disney, nephew of the late Walt Disney. Shamrock and its partners own nearly 5 million Polaroid shares and have made a $42-a-share, or about $2.4-billion, tender offer for the rest.

Shamrock has promised to raise its offer to $44 a share if Polaroid accepts a buyout. Shamrock also is suing in Delaware to scrap Polaroid’s issuance of 9.7 million shares to an employee stock fund, which it contends was an illegal anti-takeover move. If it fails to overturn the plan, Shamrock said it will cut its tender offer to $40 a share.

Analysts said the disclosure by Polaroid puts pressure on Shamrock to keep its bid alive, suggesting that Shamrock may have to raise its bid. They noted that Polaroid’s stock fell $1.125 a share Tuesday to $40.125 in composite trading on the New York Stock Exchange.

“They can’t let things get too cold. They have to keep the game going,” said B. Alex Henderson, a Prudential-Bache analyst who follows Polaroid.

Regina B. Wiedenski, who tracks Polaroid for Adams, Harkness & Hill in Boston, said that if Polaroid does sell a minority stake to a third party, Shamrock may launch a proxy fight or sue the company to stop it. Selling a minority stake may also leave Polaroid vulnerable to lawsuits from shareholders arguing that the company unfairly diluted their holdings.

Analysts speculated that Fuji might be an interested third party because Polaroid wants to sell its own 35-millimeter film. Fuji could become the supplier, they said, and receive a Polaroid stake in the deal. In addition, they noted, Japanese companies often become partners in companies they do business with by buying minority interests in them.

Lazard Freres’ name surfaced because it recently formed Corporate Partners Limited Partnership, a fund started with money raised from about 40 pension funds and institutional investors. Lazard has said the fund will take 10% to 40% stakes in takeover targets.

A spokesman for Fuji declined comment. Lazard Freres referred inquiries to a company spokeswoman who could not be reached for comment.

Separately, a Shamrock SEC filing shows the investment firm has linked up with Elders Finance, a subsidiary of Elders IXL Ltd., the giant Australian beer and agribusiness concern whose products include Fosters beer. Elders, one of Australia’s biggest companies, is required to contribute $48.5 million to a Shamrock partnership, filings show.