Giant Group Receives an Unsolicited Bid
Title insurance company executive William P. Foley II on Thursday made an unsolicited $49-million bid for Giant Group Ltd., setting the stage for what may be a proxy fight with Beverly Hills businessman Burt Sugarman.
Foley’s offer intensifies an already bitter confrontation between two Southern California businessmen, each of whom is known to have a penchant for bruising proxy battles.
Foley has acquired 14.75% of Giant Group’s outstanding shares in recent months. Sugarman, Giant Group’s chairman, responded by filing lawsuits against Foley and adopting a “poison pill” shareholder package designed to take effect should Foley’s stake in Giant hit 15%.
Foley, chairman of Irvine-based Fidelity National Financial Inc., described his goal as a “friendly, negotiated transaction,” but he said he won’t rule out a proxy fight if the deal is not accepted by Wednesday.
A spokesman for Giant, which controls the Rally’s hamburger chain, declined to discuss Foley’s latest move.
In a letter delivered Thursday to Sugarman, Foley offered about $12 per share worth of Fidelity National common stock for each share of Giant Group it does not already own.
Giant shares closed down 37.5 cents at $10, after hitting a 52-week high of $10.875 earlier in the day. Fidelity slipped 25 cents to $17.25. Both stocks trade on the New York Stock Exchange.
Giant, which operates out of a Beverly Hills office building, has a 47% stake in Rally’s, a 500-unit drive-through chain that has been struggling to turn a profit in recent quarters.
Restaurants such as Rally’s are, “to be conservative, a troubled concept,” said Ron Paul, president of Technomic Inc., a Chicago-based consulting firm. “The appeal of their value-oriented menus has eroded dramatically since the late 1980s.”
Foley has fast-food connections: He is also chairman of Anaheim-based CKE Restaurants, which owns the Carl’s Jr. chain. But he apparently is looking past the Rally’s burger chain to the estimated $50 million in cash, tax benefits and receivables that Giant has accumulated by buying and selling businesses.
Giant executives would not discuss the company’s balance sheet. But Fidelity National Vice President Andrew Puzder described Giant as “an undervalued asset.”
Sugarman, 56, made his name and money in the entertainment industry, producing the hit TV show “Midnight Special” and several movies, including “Children of a Lesser God.” He is married to “Entertainment Tonight” co-host Mary Hart.
Associates say Sugarman prefers to keep his name out of the news. In recent years, however, he has generated headlines outside Hollywood with deals ranging from cement plants and media companies to vacuum cleaner bags and hamburger chains.
In the mid-1980s, he failed to complete a hostile bid for a Los Angeles-based aerospace parts manufacturer. Sugarman also abandoned an acrimonious $1.7-billion takeover attempt during the 1980s for Media General, a Richmond, Va., company that owns newspapers and television stations.
In 1991, Sugarman paid nearly $620,000 in fines to settle Securities and Exchange Commission charges that he failed to follow SEC reporting requirements while amassing a 47% interest in the Louisville, Ky.-based Rally’s chain.
Foley has also made a name as a hard-nosed businessman.
He used a string of acquisitions to make Fidelity National the nation’s fifth-largest title insurance company. In the process, he came to be called “the Bruce Lee of the title industry.” Last year, Foley abandoned a hostile bid for U.S. Facilities Corp., a Costa Mesa-based insurance company.
