Court Showdown Likely for Pillsbury, Grand Met

The British conglomerate Grand Metropolitan PLC said Tuesday that it would allow its $5.23-billion stock tender offer for Pillsbury Co. to expire at midnight Tuesday, and industry analysts forecast that the company would receive more than the needed majority of shares it is seeking.

But Pillsbury’s “poison pill” defense remains in force after a court ruling Monday, and the analysts expect the focus of attention in the battle to shift from Wall Street to the courtroom.

“Grand Met is forcing shareholders to take action,” said L. Craig Carver at Dain Bosworth. “If they get more than 51% of Pillsbury’s shares, it places them in a position to call a few shots,” he said.

The Grand Met offer received a court setback Monday when the Delaware Chancery Court refused to grant a preliminary injunction stopping Pillsbury’s poison pill share plan that effectively blocks the execution of a takeover, even if Grand Met has enough shares to take control.

Grand Met has asked the court to reconsider the ruling because of Pillsbury’s plan, announced Monday, to sell its Burger King fast-food division, which has been a drag on earnings. The hearings on the poison pill provision were held last week, before the Burger King spinoff was announced.

Lawrence Adelman, analyst at Dean Witter Reynolds Inc., said that because of Pillsbury’s stiff resistance to the $60-a-share offer, Grand Met wants to be able to show investor support for their offer.

“They want to count the shares, see what they get,” he said. “They’ll probably show acceptance of their offer to the Delaware court.”

Adelman said Delaware Judge William Duffy’s decision gives Grand Met the opportunity to try again to force Pillsbury to redeem its shareholder rights plan.

Pillsbury announced Monday that it would spin off Burger King in a bid to thwart Grand Met’s hostile bid. But industry analysts had few encouraging words to say about the plan.

Grand Met Chairman Allen Sheppard was quoted as saying Tuesday that Pillsbury’s plan is a weak defense against the firm’s takeover bid and that he should lower the takeover price. His comments came in a London interview with the Wall Street Journal.

Analysts doubt that Pillsbury will be able to match Grand Met’s offer.

Pillsbury’s stock was lower Tuesday, closing down 25 cents on the New York Stock Exchange at $58.75 a share, adding to losses of $1.375 on Monday after the Burger King plan was announced.