MINNEAPOLIS (AP) _ The Pillsbury Doughboy was fitted with boxing gloves Tuesday as the food and restaurant company urged shareholders to reject Grand Metropolitan PLC’s unsolicited $5.23 billion takeover bid.
″Now is not the opportune time to sell the company,″ Pillsbury Co. Chairman Philip L. Smith said. ″Greater values are available to the shareholders in the long term.″
The unanimous decision to reject as ″inadequate″ the $60-a-share tender offer from Britain’s Grand Metropolitan was made by Pillsbury’s board of directors, which met Monday for about 12 hours to mull the company’s options in consultation with management and a team of financial advisers from New York City.
The options could include a special dividend to shareholders, the selling of some of the company’s businesses in a financial restructuring, a leveraged buyout, or ″the sale of an equity interest to a third party,″ Smith said.
″There are options that include not putting the company up for sale,″ Smith said.
He said the company’s directors will decide on an alternative before shareholders are required to decide whether to tender their shares. The offer from the liquor and hotel conglomerate expires Nov. 1, but could be extended.
Ian A. Martin, chief executive of U.S. operations for Grand Metropolitan, said he was surprised Pillsbury’s board concluded the all-cash offer was inadequate.
″Our price represents more than 50 percent over the Pillsbury market price prior to the announcement of our offer,″ Martin said. ″We doubt that Pillsbury stockholders will agree with their board’s conclusion. We believe that our tender offer should be welcomed, not only by Pillsbury stockholders but also by its employees, franchisees and customers.″
Pillsbury’s stock rose 37 1/2 cents a share to $59 a share in consolidated trading on the New York Stock Exchange.
″The ball is still in Pillsbury’s court,″ said George Dahlman, a stock analyst for Minneapolis-based Piper Jaffray & Hopwood Inc. ″Speculators ought to get into the stock because we think it could go higher. Others who are more conservative may want to take their profits.″
Asked what direction the board was leaning in chosing an alternative to accepting the offer, Smith said, ″There really isn’t at this particular time any real favorite.″
Smith and other Pillsbury executives sported buttons to a news conference Tuesday showing the pudgy Doughboy, a company symbol, in a boxing pose.
In a letter to employees, Smith said the Grand Metropolitan offer ″does not reflect the values inherent in our company.″
He said efforts to revitalize the company, which were started before the takeover bid was launched Oct. 4, are worth fighting for.
″That’s why we’re putting gloves on the Doughboy and protecting your best interests and the values we are building,″ Smith said in the letter.
Asked at the news conference what he thought Pillsbury’s chances were in defending against a takeover bid by a well-heeled suitor, Smith said, ″It ain’t over ’til it’s over.″
Smith said Pillsbury’s board of directors made its decision to urge rejection of the offer after deciding that significant investments have been made to improve slumping Burger King operations and the full-service restaurant chain of Steak & Ale. The directors also decided there is ″significant″ opportunities in the U.S. foods business of Pillsbury, Smith said.
″It is critical that we improve the performance of Burger King,″ said Smith, who announced the appointment Tuesday of Jerry W. Levin to head the world’s second-largest hamburger chain, which is based in Miami.
He said Levin has a record at Pillsbury of revitalizing businesses such as Steak & Ale. Levin also was chairman of Pillsbury’s Haagen-Dazs ice cream business. The company’s other holdings include Green Giant vegetables and Pillsbury baking goods.
Smith said he thinks Burger King can become a ″strong No. 2 business″ to industry giant McDonald’s Corp.
In his letter to Pillsbury employees, Smith repeated allegations that Grand Metropolitan has a history ″filled with cost-cutting actions, wholesale staff reductions, and the sales of businesses that they at one time called ’core operations.‴
Grand Metropolitan has said it would sell Pillsbury’s full-service restaurants to comply with laws that forbid liquor distillers from selling liquor at retail outlets, but it has said it will retain Burger King and other core businesses. The British company also has said it would cut some senior management jobs at Pillsbury if the bid is successful.
Pillsbury is suing Grand Metropolitan in 14 states on grounds that the takeover would violate the so-called ″tied-house″ liquor statutes. Additional legal action was taken Tuesday with a lawsuit filed in Washington D.C., alleging that Grand Metropolitan’s tender offer violates a section of the 1916 Shipping Act.
According to the suit, it would be illegal for Pillsbury to transfer ownership of its TPC Transportation Co. to Grand Metropolitan because Grand Metropolitan is a foreign company. Such a transfer requires the approval of the U.S. Secretary of Transportation, according to the lawsuit. TPC is a water carrier operating towboats and barges, Pillsbury said.