Best Agrees To Acquisition By New York Investment Firm
RICHMOND, Va. (AP) _ A New York investment company will purchase Best Products Co. Inc. for $684.8 million in what both parties termed a friendly buyout, officials announced Monday.
Adler & Shaykin will purchase the Richmond-based discount retailer through two newly created corporations, BAC Acquisition Inc. and BAC Holdings Group Inc. BAC Acquisition will pay cash for all outstanding Best Products common stock at $27.50 a share for the company’s 24.9 million outstanding shares.
The offer was unanimously approved and recommended to stockholders by the Best Products board of directors.
Financial analysts expressed surprise at the high price of the offer, which they called an excellent value for shareholders. Best Products shares were trading at $20.75 at Friday’s close but had jumped to $26.75 Monday afternoon on the New York Stock Exchange.
″I really have to applaud the moves that the management has made in the past couple years to turn the company around,″ said R. Hutchings Vernon, an analyst with Legg Mason Wood Walker Inc. of Baltimore. ″They really did everything they could to make the company worth more.″
Leonard Shaykin, a managing partner of Adler & Shaykin, said the New York firm was attracted by Best Products’ strong management team and customer base and loyal employee following.
″We think the company has very strong prospects,″ Shaykin said. ″We think this segment of the retailing industry is counter-cyclical, properly postured for the near term and strategically well-postured for long term.″
Adler & Shaykin, which specializes in management leveraged buyouts, will ″absolutely″ continue Best Products’ retail sales operations and ″would like very much″ to retain its current management, Shaykin said.
Best Products will become a privately held company once the transaction is completed. The total cost of the acquisition, including purchase of stock, refinancing of the company’s $392 million debt and related expenses, is estimated at $1.1 billion.
Robert E.R. Huntley, chairman and chief executive officer of Best Products, said the Adler & Shaykin bid was the highest of five offers the company received. Company officials announced late last month that they would consider selling the company, which has 194 retail stores and 30 jewelry stores in 27 states and Washington, D.C.
In the last year or so, Best Products has scaled down catalog sales, which were dropping, and focused more on traditional discount sales, according to Ten Eyck Wellford, an analyst at Branch, Cabell & Co. He said the company’s management has done a good job cutting costs but still needs to increase sales.
Adler & Shaykin ″have got their work cut out for them,″ Wellford said.
Best Products has agreed to pay a $25 million penalty if the merger does not go through and to reimburse BAC Acquisition for expenses up to $7.5 million, officials said.
Adler & Shaykin’s $1.2 billion portfolio includes Joy Technologies Inc., Wherehouse Entertainment Inc. and Chicago Sun-Times Inc.