Source: Borden Says Kazarian Plan Not Credible
COLUMBUS, Ohio (AP) _ Borden Inc. does not consider investor Paul B. Kazarian’s plan to buy up to 90 percent of Borden’s stock credible and will proceed with discussions on a rival bid, a source close to the negotiations said today.
Kazarian’s $2.28 billion plan, revealed late Wednesday by another source, represents an effort to derail a $2 billion buyout bid by Kohlberg Kravis Roberts & Co., a New York investment firm that specializes in buying other companies.
Both sources spoke on the condition of anonymity.
Japonica Partners, Kazarian’s investment firm, said in a letter to Borden chairman Frank J. Tasco that it is interested in producing a ″significant transaction with Borden or its shareholders″ to provide greater value than would be available under the KKR offer.
The Kazarian proposal, which calls for paying $16 to $18 a share for Borden tock, comes to $2.28 billion if the higher price were used to buy 90 percent of the Columbus-based food company’s 141 million shares outstanding.
KKR has offered $14.25 a share for Borden in the form of part of its stake in food-and-tobacco conglomerate RJR Nabisco Holdings.
″As we have said repeatedly from the outset we wish to act as a proactive white knight; and the board’s determination to sell Borden mandates that the board accept us in that role,″ said the Japonica letter disclosed Wednesday.
But today, a source close to the negotiations said the Japonica letter falls far short of a credible offer.
In a two-hour meeting with three top Borden officials Wednesday night in New York, Kazarian refused to elaborate on financing options or the structure of the deal, said the source.
The meeting got off to a rocky start when Kazarian showed up four hours late and refused to sign a confidentiality agreement, the source said.
″He said the letter speaks for itself,″ the source said of Kazarian. ″But there’s no proposal or offer in this letter.″
Borden directors will discuss Japonica’s letter, but they plan to move ahead with KKR’s bid until they get something more substantive from Kazarian, the source said. The directors are to meet today to review the final version of the definitive merger agreement with KKR.
A call to Borden’s New York office seeking comment late Wednesday met with only a recorded message. A message was left today at Borden’s Columbus, Ohio, headquarters.
Kazarian’s proposal, according to sources close to the negotiation, offers various transaction possibilities, including an equity infusion of $200 million to $500 million for a corresponding stake in Borden.
Possibilities offered by Kazarian to pay for the Borden stock include cash and the stock of an unnamed New York Stock Exchange-listed company.
Kazarian’s company said it has received ″numerous expressions of interest in providing financing by substantial institutions″ but said it would not proceed until terms of a deal were agreed upon with Borden.
A clause in the Borden agreement with KKR reportedly precludes Borden executives from discussing specifics of Kazarian’s or anyone else’s proposals short of an actual buyout offer.
″They were not helpful,″ a source said Wednesday in summing up Borden management’s approach at the meeting.
Japonica said it believes that after concluding a deal, the Borden stock remaining in public hands - anywhere from 10 percent to 80 percent, according to the letter - could trade as high as $22 to $25 a share during 1995.
Borden stock closed Wednesday unchanged at $14 a share on the New York Stock Exchange. Today, Borden was up 12 1/2 cents at $14.12 1/2 .
The International Brotherhood of Teamsters pension fund advisers have recommended that the union’s pension funds not sell their 247,000 Borden shares to KKR, Teamsters spokesman Bill Patterson said today. The pension fund advisers also will urge Borden’s 41,000 other shareholders not to sell their stock to KKR either, Patterson said.