Revco Accepts Sweetened Takeover Offer
TWINSBURG, Ohio (AP) _ Revco D.S. Inc. said Friday its board accepted an investor group’s sweetened offer of $38.50 a share in cash, or $1.29 billion, to buy the major drug-store chain.
The investor group - which includes Sidney Dworkin, Revco’s chairman and chief executive, and other Revco executives - initially proposed in March to acquire Revco in a leveraged buyout paying $36 in cash and securities for each of Revco’s 33.5 million common shares outstanding.
After the announcement, Revco’s common stock was up $1.12 1/2 a share at $36.75 in late trading on the New York Stock Exchange.
The group did not say in its announcement why it raised its offer. But the delay in completing the original proposal led to Wall Street speculation that some Revco directors might have viewed the initial offer as inadequate relative to the retailer’s long-term growth potential. In addition, the price of Revco’s stock had traded between $38 and $40 a share until recently pulling back, suggesting to some observers that the Revco leveraged buyout might have to be raised in order to secure shareholder approval.
In a leveraged buyout, the purchase is made with mostly borrowed money that is repaid with funds from the target company’s cash flow or asset sales.
There also was Wall Street speculation that in view of recent takeover activity involving other retailers, the Revco investor group was willing to raise its offer to head off a potential rival bid for the company.
Revco operates more than 2,000 drug stores in nearly 30 states, with stores particularly concentrated in Ohio, Michigan, Pennsylvania, Texas, North Carolina, South Carolina, Georgia, Virginia, Tennessee and Arizona.
The company also runs about 150 Odd Lot Trading stores that specialize in selling closed-out merchandise.
In its fiscal year ended May 31, Revco’s net income climbed 46 percent from the previous year to $56.9 million, while sales rose 15 percent to $2.74 billion.