Maxwell’s Tender Offer Endorsed by Macmillan
Nearly six months after a bitter battle for Macmillan Inc. began, the publishing and information services company recommended Thursday that its shareholders accept Robert Maxwell’s $2.6-billion offer, thus paving the way for the British media magnate to achieve his goal of acquiring a major American publishing company.
Maxwell won a decisive round in the fight Wednesday when the Delaware Supreme Court blocked Macmillan from being sold to a “white knight,” the investment firm Kohlberg Kravis Roberts & Co.
In a terse, two-sentence statement, Macmillan announced that it was in the “best interest” of all stockholders to tender their shares to Maxwell. The company also said its “poison pill” shareholder rights plan--an anti-takeover device--would no longer apply to Maxwell’s bid.
Later in the afternoon, Kohlberg Kravis Roberts withdrew its offer to acquire Macmillan shares for $90.05 each. In a statement, Henry Kravis, a founding general partner of KKR, congratulated Maxwell on his acquisition.
“Maxwell Communication is purchasing an outstanding company with strong management and dedicated employees,” Kravis said. “We extend our warmest good wishes to these individuals, and we are certain that Macmillan will continue to prosper under Robert Maxwell’s leadership.”
A spokesman for Maxwell said the champagne will remain corked until the tender offer is finally completed, which they anticipated would be today. Maxwell’s $90.25-a-share offer expired at midnight Thursday.
Britain’s Largest Printer
“We’re very gratified by the result,” said Ron Wood in the Delaware office of Skadden, Arps, Slate, Meagher & Flom, one of the law firms that argued on Maxwell’s behalf before the Delaware courts.
Maxwell Communications is Britain’s largest printer, owns the Mirror Group of newspapers in Britain and ranks second only to R. R. Donnelly & Sons among printers in the United States. The Macmillan acquisition is an important piece in Maxwell’s oft-stated plan to become one of the world’s top 10 global media firms.
Maxwell first attempted to break into the American publishing world in May, 1987, when he offered $1.73 billion for the textbook publisher Harcourt Brace Jovanovich. The bid failed when HBJ, based in Orlando, Fla., undertook a costly recapitalization.
Maxwell also tried to take over the information services company Bell & Howell but lost out to the Robert M. Bass Group. Earlier this week, Maxwell agreed to purchase Dun & Bradstreet’s airline guides business for $750 million.
Macmillan, which was founded in the last century, is the nation’s third-largest textbook publishing company, with $955 million in annual sales. Macmillan owns Standard Rate & Data Service, a publishing information firm; Michie Co., a legal code and text publisher; book publisher Charles Scribner’s Sons, and Atheneum Publishers. It also owns the Berlitz language schools and the Katharine Gibbs secretarial schools.
Macmillan’s recommendation to tender all outstanding shares to Maxwell caps six months of bidding from several parties. The Bass Group, which owns 9.2% of the company’s stock, fired the first shot in mid-May, offering $64 a share, or about $1.6 billion. Macmillan responded with a plan to restructure the company that would have paid stockholders $64.15 a share. Bass then sued to block the restructuring and won, thus dealing Macmillan its first defeat in the Delaware courts.
Bass Group raised its bid twice, bringing the price tag to $2 billion, or $75 a share, before retiring to the sidelines in September to watch the ensuing bidding war between Maxwell and KKR.
Maxwell entered the ring in July, offering to buy Macmillan for $80 a share in cash. In the following months, Maxwell suggested various deals that would permit him to purchase all or some of Macmillan’s assets--especially the profitable information services--and also upped his bid to $84 a share. But Macmillan rebuffed him at every turn.
‘Lockup’ Agreement
In mid-September, Macmillan agreed to a $2.36-billion leveraged buyout with KKR, but three days later Maxwell sweetened his cash bid to $2.41 billion, or $86.80 a share. Ultimately, the competing offers were $90.05 a share in cash and securities from KKR and $90.25 in cash from Maxwell.
As part of KKR’s agreement with Macmillan, the investment firm was permitted to buy four of the company’s businesses--Macmillan Book Clubs, Macmillan Reference Books, Berlitz and Michie--for $865 million if Macmillan were sold to another company. This so-called lockup agreement, and the manner in which Macmillan conducted the final bidding, were what Maxwell objected to in his suit.
Maxwell contended that his bid had been improperly disclosed to KKR, thus giving KKR an unfair advantage in the auction process, and the court agreed. A three-judge panel of the five-member Delaware Supreme Court issued a strongly worded ruling that blocked KKR’s takeover, saying that “the bidding process here was neither evenhanded nor neutral.”
The court also blocked the lockup provision. Early in the day Thursday, a KKR spokesmen said the company could still pursue their case in court and, if their contract with Macmillan were upheld, they could enforce the lockup on the four companies. This would have placed Maxwell’s bid in jeopardy, since it was conditioned on removal of the lockup, which would have saddled him with a $250-million tax bill. However, these obstacles were removed by the afternoon, when KKR conceded defeat.
When Bass first made his offer May 17, Macmillan’s stock was trading at roughly $51 a share. In heavy New York Stock Exchange composite trading, Macmillan closed Thursday at a new high for the year, $90.125, up 62.5 cents a share.
