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Dominion-Edelman Group Indicates Willingness To Sweeten Bid

May 12, 1987

NEW YORK (AP) _ The investor group making a hostile bid to acquire Burlington Industries Inc. said Tuesday it might be willing to sweeten its offer, which currently is $67 a share.

The group, led by New York investor Asher B. Edelman and Dominion Textile Inc. of Canada, also criticized Burlington’s alternative plan to buy back 29 percent of its stock as ″coercive and unfair″ to Burlington’s stockholders.

Burlington, the nation’s biggest textile manufacturer, said Monday it soon would launch an $80-a-share cash tender offer for 8 million of its 27.3 million common shares outstanding.

Burlington also said its board was evaluating a variety of restructuring steps, including a leveraged buyout, a merger or other business combination involving the company or one or more of its main operating groups.

In a leveraged buyout a company is purchased with mostly borrowed money that is repaid with funds from the target company’s cash flow or asset sales.

The Edelman-Dominion group already owns 13.4 percent of Burlington, and has begun a tender offer for the remaining stock priced at $67 a share, or $1.58 billion. Burlington said Tuesday its board rejected the offer as inadequate.

Burlington’s common stock closed unchanged at $66 a share Tuesday in New York Stock Exchange composite trading.

In a letter to Burlington’s directors, Dominion and Edelman requested negotiations with Burlington and ″any information that might demonstrate that a price higher than our current offer can be justified.″

″We are prepared to explore all alternatives, including a higher price,″ they said.

Daniel J. Good, head of merchant banking at the investment firm Shearson Lehman Brothers Inc., which is advising the Edelman-Dominion group, said the letter ″provides every opportunity for the board to sit down and try to negotiate a good deal for its shareholders.″

″We have the willingness to come to the bargaining table with an open mind,″ Good said.

Dominion and Edelman also said in their letter that Burlington’s plan to buy back a portion of its stock was coercive to Burlington’s stockholders and ″constitutes a possible two-tier offer and directly contradicts″ Burlington’s policy of requiring that a fair price be paid to all its stockholders.

A two-tier offer typically refers to a bid in which a suitor makes a cash offer for a major portion of a company’s stock and then offers to buys the rest of the shares for a lower price that often involves other securities instead of cash.

Two-tier offers in the past have been criticized for coercing a target company’s stockholders to quickly tendering their shares for the initial cash portion of the offer, rather than risk receiving the less valuable price paid in the second step of the offer.

At Burlington’s headquarters in Greensboro, N.C., spokesman Harold McLeod said the group’s letter was ″forwarded to our board for consideration.″ He declined further comment.

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