Grand Metropolitan May Be a Takeover Target

Grand Metropolitan, the British liquor and foods conglomerate bidding for Pillsbury Co., might face a takeover itself, according to executives.

Reports of a possible takeover came as Grand Met’s $5.23-billion bid for Pillsbury was scheduled to expire Monday. Meanwhile, lawyers for both companies were expected to submit written arguments to a Delaware judge who is weighing the legality of Pillsbury’s so-called poison pill anti-takeover defense.

Grand Met Chairman Ian A. Martin, in a report published in the Wall Street Journal on Monday, said the company is taking seriously rumors of an effort to line up potential bidders for parts or even the entire London-based company. Pillsbury, in previous filings with the Securities and Exchange Commission, has said one potential answer to the Grand Met takeover was for Pillsbury to launch a counter-bid for the British company.

“We have to take it seriously,” Martin said. “We’re in a major bid battle here. We don’t know the source of the rumors or how serious they were.”

Difficult to Acquire

Martin cited Grand Met’s relatively low stock price as a potential lure to a corporate raider. Analysts say Grand Met is worth at least twice as much as its current stock price--about $8 a share--if the company is acquired and its divisions sold off.

Edward deBoisgelin, an analyst who follows European companies for Smith Barney, Harris Upham & Co., says Grand Met has managed to double profits in the past five years by focusing on branded liquor and food products as well as restaurants. “But people look at Grand Met as a brewer and spirits company with businesses here and there. It’s basically a case of mistaken identity.”

Although Grand Met has no potent anti-takeover defenses to speak of, the company would still be difficult to acquire, say analysts. Analysts estimated that buying all of Grand Met’s outstanding shares and securities would cost at least $7 billion on the open market, and British law requires financing to be in place when a takeover offer is made.

“If you look at the arithmetic, I don’t see how Pillsbury could do it financially,” said Roger W. Spencer a food industry analyst at Paine Webber.

Poison Pill Questions

On the London Stock Exchange Monday, shares of Grand Met fell slightly to about $7.80. “The market is saying it is all speculation,” Spencer said.

Meanwhile, observers of the Grand Met fight to acquire Pillsbury continued to focus on the actions of a Delaware judge. Retired Justice William Duffey has previously upheld Pillsbury’s poison pill plan, which would make a takeover prohibitively expensive. Grand Met has said its offer is conditioned on Pillsbury revoking the plan.

Monday, lawyers were supposed to have submitted legal briefs to Duffey, who has said he would attend an out-of-court conference with lawyers of both firms. The discussions could lead Duffey to reopen court hearings on the poison pill.