Kemper Considers Selling After GE Sweetens Its Offer

Kemper Corp., which has been resisting a takeover bid from GE Capital Corp., said Sunday that it would consider GE’s sweetened offer of $60 a share.

GE Capital, a unit of General Electric Corp., raised its bid just three days before it was to launch a proxy battle for control of Kemper.

Kemper, an insurance and investment company, had responded to GE Capital’s earlier offer of $55 a share, or $2.2 billion, by saying it wasn’t for sale. But it responded more favorably to GE’s new offer of $60 a share, or $2.4 billion.

“We felt rather strongly that we had a chance of winning the election as long as GE kept its price at $55 a share,” David Mathis, Kemper’s chairman and chief executive, told the Reuters news agency. He said that while the $60-a-share price “was not full and fair value, it was enough to consider putting the company up for sale.”

“We view this as win-win for both sides,” said Anthony Zehnder, a spokesman for GE Capital, based in Stamford, Conn. “There was mutual recognition that a negotiated transaction served everyone’s interest. We expect to do due diligence and close the deal at $60.”

Kemper’s stock, which rose $1.375 to close at $57.50 on the New York Stock Exchange Friday, is expected to open higher today in response to the higher bid price.

GE wants to buy Kemper to expand its mutual fund and money management businesses that cater to individual investors.

Kemper’s stockholders, more than 70% of which are institutional investors, were scheduled to vote on Wednesday to re-elect four of Kemper’s directors, including Mathis, or to support GE Capital’s slate.

The GE nominees have said they’re committed to selling the Long Grove, Ill.-based financial services company to GE Capital.

Under the agreement, GE raised its bid for Kemper in exchange for a full review by GE Capital of Kemper’s businesses, the companies said.

The pact also includes a stipulation that Kemper and GE Capital will each vote its proxies at the Kemper annual meeting in Chicago, and then adjourn the meeting until Aug. 22 before any vote on the election of directors.

“We will be talking to others in this process,” Mathis said. “We’ve, in effect, said GE and others will be able to operate on the same playing field.

“We’re preparing a package of information and others that are interested in the company will be able to review the necessary materials, and we’ll cooperate fully.”

Mathis said Kemper has made initial contact with other potential suitors, although he declined to provide names.

Travelers Corp. and Allianz, a German insurance company, have been rumored to be interested in Kemper. Mathis declined to comment.

“We’ve had lots of contact with a wide variety of outsiders, but at that time, we weren’t in the sale mode,” Mathis said.

“We just said, ‘Thank you very much for your interest, but we’re not for sale, and if we get into the mode of wanting to consider a sale, we’ll be back in touch.’ ”

Kemper’s board has repeatedly rejected GE’s initial offer of $55 a share, calling it a “low ball” offer.

At stake is the continuity of Kemper’s board of directors. Four of Kemper’s directors, including Chairman David Mathis, are up for reelection.

Shortly after Kemper’s board rejected GE’s offer, it approved golden parachutes for its top executives. Under the compensation plan, the top five executives could receive more than $19 million if they leave the company because of a takeover.

GE has nominated its own slate of directors, who say they’re committed to selling Kemper to the GE subsidiary.

Last week, Mathis asked shareholders to give Kemper management a year to see how successful the restructuring could be.

He told shareholders that if Kemper’s stock failed to trade at a price of at least $65 a share for a specific period during the next year, the board would allow the stockholders to decide at their 1995 annual meeting whether to put the firm up for sale.

GE Capital Chairman Gary Wendt’s initial offer to buy Kemper came as an “absolute surprise,” Mathis said.

Kemper, he added, “was clearly not for sale.”

“If it were, it would have been the worst possible time to put the company up for sale. We had just completed our restructuring, but the proof of the pudding was not in place in terms of earnings. If (Kemper) was for sale, we would have waited to see a few quarters, or a couple of years, of good earnings. Intuitively, it’s a terrible time to sell.”

Dean Witter analyst Michael Lewis said he believes there’s a chance that Kemper will ultimately be sold at a higher price.

“It seems as though $60 (a share) is just an opening bid and there’s probably a decent chance that once the parties sit down to negotiate, the bid could go higher,” Lewis said.

“Kemper is playing hardball. They know they’re an attractive company to the right party. My gut feeling is that this company should go for $65 to $70 (a share).”