Macmillan Inc.'s board urged shareholders Wednesday to reject a $2.51-billion tender offer from British publisher Robert Maxwell, setting the stage for a court showdown over the conduct of the bidding for the publishing giant.
Macmillan previously agreed to a slightly lower, $2.5-billion buyout proposal from a group led by the investment firm Kohlberg Kravis Roberts & Co. and including Macmillan senior management.
Its rejection of Maxwell’s latest offer came as no surprise.
Macmillan stock rose 25 cents a share to $88.625 in consolidated New York Stock Exchange trading. That was slightly below Kohlberg’s latest offer of $90.05 in cash and securities for each of Macmillan’s 27.8 million shares. Maxwell’s latest offer was $90.25 a share in cash.
“I don’t think the rejection makes much difference,” said J. Kendrick Noble, a media analyst for the investment firm Paine Webber Inc. “A recommendation from the board can’t stop an alternative bid.”
Maxwell’s tender offer is set to expire Oct. 13, while Kohlberg’s offer expires 24 hours later. Noble said that “the key issue now is in the courts.”
Maxwell filed suit in Chancery Court in Delaware, charging that the bidding process was unfairly skewed in favor of the management bid. A hearing is scheduled for Monday.
Macmillan said its board decided to recommend that shareholders reject Maxwell’s offer because it contained several conditions, including invalidation of a “legal and binding contractual obligation” with the Kohlberg group.
Early last week, Macmillan gave both Maxwell and Kohlberg a chance to make final offers for the company. At the time, Maxwell was offering $86.80 a share in cash, while Kohlberg had offered $85 a share in cash and securities.
At the conclusion of the auction, Macmillan said it had agreed to an offer from Kohlberg of $90.05 a share in cash and securities. Maxwell’s top offer to that point had been $89 a share in cash.
As part of the pact with Kohlberg, Macmillan agreed to let the group buy four of Macmillan’s businesses for $865 million should its merger not be concluded. They are the Berlitz language centers, the directory division, the direct marketing division and a division that publishes state legal codes.
Two days after Macmillan accepted the Kohlberg offer, Maxwell boosted his offer to $90.25 a share in cash but said the new bid was subject to, among other things, elimination of the agreement to sell the four businesses.
Other conditions included elimination of Macmillan’s “poison pill” takeover defense that would make it more costly for a bidder to acquire the company without support of management and to a limit of $70 million on the amount of fees to be paid to Kohlberg.
As an alternative, Maxwell said he would pay $900 million for the four businesses that Macmillan agreed to sell to the Kohlberg group and drop his tender offer.