Merger & acquisition news

Merger & acquisition news

First Bank confirms stock buybacks in attempt to buy First Interstate

First Bank System Inc. is buying back substantial amounts of its stock following its announced agreement last month to purchase First Interstate Bancorp for approximately $10 billion in stock. Wells Fargo, which is in the midst of a hostile bid for First Interstate, recently charged that First Bank had artificially inflated its stock price. While First Bank would not respond, it did indicate it had purchased 3.1 million of its shares in the fourth quarter, most of which were bought during the four weeks after its Nov. 4 agreement with First Interstate. According to Thomas K. Brown, an analyst with Donaldson, Lufkin & Jenrette, “The investment community feels it is not getting a fair read on the value of First Bank System’s stock price.” The difference between the value of the two bids for First Interstate has increased over the past month. At the outset, First Bank’s offer was worth only $3 less than the Wells bid. Now the gap has grown to $11 with Wells offering $144.25 of its stock for each First Interstate share and First Bank offering $135.20 of its stock.

Teepak Merger plan pact settles FTC charges

Continuing to pursue its bigger U.S. rival, Devro International PLC has agreed to divest itself of Devro, North America in order to meet Federal Trade Commission requirements regarding its proposed merger with Teepak International Inc., based in Westchester, Ill. Also, the buyer will have to be approved by the FTC. In March, Devro released plans to purchase its larger US. competitor which produces and distributes sausage casings in the US and Canada for $135 million in cash.

Shepherd Tissue sues Scott Paper and Kimberly-Clark

Shepherd Tissue Inc. has filed a lawsuit in New York State Supreme Court suing Kimberly Clark Corp. and Scott Paper Co. In July, Kimberly Clark indicated it would purchase Scott in a $7.36 billion deal which would instantly make Kimberly-Clark the biggest global maker of tissue products. The suit refers to an asset-purchase agreement made between Dallas-based Kimberly-Clark and Shepherd when Shepherd purchased Kimberly-Clark’s Memphis, Tenn., paper mill for about $65 million in ’94. Shepherd contents that as part of the agreement, Kimberly-Clark agreed it would not sell private-label bathroom tissue, napkins and paper towel products for a period of three years. If Kimberly-Clark were to pursue that market, it would be required to pay a subsequent fee to Shepherd for two years. When the asset-purchase agreement was made, Shepherd was worried that competition from Kimberly-Clark would threaten the smaller concern’s efforts to establish a private-label business. Although a restraining order to stop the merger hasn’t yet been ruled out, Shepherd is asking for damages not less than $65 million.

Praxair gains right to review confidential CBI information

Industrial gas manufacturers Praxair Inc. and CBI Industries have signed a confidentiality agreement which gives Praxair the authority to review specific nonpublic information about CBI, headquartered in Oak Brook, Ill. The agreement will prohibit Praxair or any of its affiliates from purchasing any CBI securities prior to Jan. 15, 1996, except under considerations. DAnbury, Conn.-based Praxair offered to buy CBI in October after CBI discontinued merger negotiations between the two companies. Praxair started a $2.1 billion hostile tender offer early last month. As of this writing, holders of 1.6 million of CBI’s 38 million shares outstanding have accepted that offer.

Magma Copper stock soars following huge takeover bid from Broken Hill

Magma Copper Company watched its stock skyrocket 29 percent following its unexpected $1.8 billion takeover bid from the Broken Hill Proprietary Company of Australia. While the $28.-a-share bid along with the assumption of $600 million in debt still awaits the green light from Magma’s board, industry observers predict another suitor will not jump in, at least not now. The majority of analysts are in agreement that in spite of current high copper prices, rock boom inventory levels and a robust demand for the metal, the Magma purchase is not likely to be a trendsetter industry-wide. By and large, the copper industry remains a very concentrated business. Assets are costly, and in most instances it is simply more cost effective for companies to explore than to purchase another concern. Few companies in the business complement each other as well as Tucson, Ariz.-based Magma and Broken Hill. Magma’s expertise is in smelting and refining; Broken Hill, on the other hand has neither operation.

Chrysler sues Iacocca over role in takeover plan

The Chrysler Corporation is suing Lee A. Iacocca for an undisclosed sum alleging that its former chairman released confidential information regarding a takeover of the company to notorious corporate raider Kirk Kerkorian during the time that Iacocca was still in a role of consultant to Chrysler. After that, Kerkorian started buying Chrysler stock. The suit says that Iacocca began releasing that information as early as the period of his consultancy which began in 1993. At that time, he was earning $500,000 a year as a consultant and received company perquisites until the end of 1994. The suit requests that the court order Iacocca to return all that he was paid from Chrysler since he began providing privileged information to Kerkorian and to compensate it for its costs in defending against Kerkorian’s actions. Also, the suit requests that the court rule that the Chrysler board was correct in refusing to permit Iacocca to cash in close to $40 million in stock options.

Earle Palmer Brown merges Florida operations with RYP

Earle Palmer Brown has combined its St. Petersburg, FL office with Robinson, Yesawich & Pepperdine of Orlando, FL, resulting in an agency with $125 million in billings. The new entity, Yesawich, Pepperdine & Brown will offer general advertising, public relations and direct marketing services as well as broadcast advertising all under one umbrella. Robinson Yesawich brings a roster of hotel, resort and travel-related clients including Universal Studios (Florida and Hollywood), Doubletree Hotels Corp., Carnival Hotels and Resorts, the St. Maarten Tourist Board and Fiesta Americana/Fiesta Inns, to the merger table. Earle Palmer Brown’s Florida office provides ad services travel and resort clients as well as the Florida lottery.

IPO madness is running rampant

Initial public offerings today are on the increase — the number of exchange-listed public companies has grown from 7,000 to 9,000 in only two years. However, John Laporte, manager of the T. Rowe Price New Horizons fund reassures that anyone concerned about stocks diving from too much supply should remember that the three largest cash takeovers in ’95 alone have put more dollars in investors’ pockets than IPOs have taken out. He predicts that technology will prove to be the most rapidly-growing sector over the next five years and also the best stock sector.

Moore’s request to enact poison-pill defense against Wallace is denied

Thanks to the ruling of a Delaware Federal Judge, Wallace Computer Services can employ its “poison pill” to ward off Moore Corporation’s $1.38 million hostile takeover bid. However, the judge also dismissed Wallace’s counterclaim that a deal with Moore would result in a violation of United States antitrust laws. For four months, Chicago-based Wallace has rebuffed Toronto-based Moore, even though close to 73.5 percent of Wallace’s shares have been tendered to Moore’s $60-a-share offer. Moore will need a full 80% of the shares to defeat the poison pill. Wallace asked shareholders to comply with that requirement prior to Wallace’s annual meeting.

Well point is considering seeking payment from Health Systems for failure to complete merger

In their latest hostile interchange, WellPoint Health Networks Inc. may ask Health Systems International Inc. for a $50 million payment if Health Systems does not comply with terms of their $1.6 billion definitive agreement to merge. WellPoint and its parent, Blue Cross of California, have rebuffed Health System’s demands which they contend “would have placed the personal interests of Health Systems’ insiders ahead of those of the new company’s shareholders.” WellPoint also said that Health Systems’ alleged breaches of the agreement prevent Health Systems’ from terminating the agreement. All three companies are based in Woodland Hills, Ca. While both parties have indicated they believe the other would like to retreat from the deal, one thing is clear: neither wants to be left holding the bag — a $50 million penalty.

Grace weighs alternative options to a spinoff — merger of dialysis unit is possible

W.R. Grace & Company, headquartered in Boca Raton, Fla. is mulling over alternatives to a spin off of National Medical Ca, its profitable kidney dialysis business including alliances and other undisclosed arrangements. One viable option would be to merge National Medical Care into a part of Baxter International, an old arch rival of National Medical. Another scenario is some combination involving National Medical and kidney dialysis businesses, Baxter, Gambro A.G. of Switzerland and Fresenius of Germany. Some months ago, Grace’s major shareholders started pressuring the company to restructure so that its stock price would better mirror the profits of its sundry businesses. Shareholders were informed by company executives that they were researching various avenues to sell National Medical for as much as $4.5 billion, but were thwarted by an ongoing investigation into the National Medical’s Medicare billing practices.

Copyright Quality Services Company Dec 18, 1995

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