Content area
Prentice-Hall Inc. directors, calling Gulf & Western Industries Inc.'s $700 million tender offer "inadequate," said they would seek a better offer and granted "golden parachute" severance provisions to 13 officers and directors.
Dillon, Read & Co., Prentice-Hall's investment banker, has been actively seeking a friendly suitor for the company. One source said several domestic and foreign companies, both in publishing and non-publishing businesses, have expressed interest in Prentice-Hall. Takeover experts are divided on the subject. One said, "There's room for a sharp bidding contest here." Others, however, questioned whether a company of Prentice-Hall's size and relatively limited publishing and information services operations could command a much higher price than G&W offered.
Though Prentice-Hall is seeking a higher bidder, sources close to the company indicated the publisher wouldn't resist G&W if it emerged with a higher offer. Prentice-Hall, in its statements and Securities and Exchange Commission filings, didn't say that it opposed G&W, only that its investment banker had determined it could get a better price. In a letter to Prentice-Hall directors, Dillon Read said the G&W price was inadequate based on Prentice-Hall's historical market price and trading volume data, information on certain other tender offers and mergers and financial information on companies in businesses comparable to Prentice-Hall's.
NEW YORK -- Prentice-Hall Inc. directors, calling Gulf & Western Industries Inc.'s $700 million tender offer "inadequate," said they would seek a better offer and granted "golden parachute" severance provisions to 13 officers and directors.
In response G&W said, "We think our offer is a thoroughly fair price and we are proceeding."
G&W on Wednesday began a $70-a-share tender offer for the Englewood Cliffs, N.J., publisher.
In American Stock Exchange composite trading yesterday, Prentice-Hall closed at $73.625 a share, up $1.50, amid speculation that one or more rival bidders will emerge. About three million of the company's 10 million shares outstanding are in the hands of speculators, Wall Street sources said.
Prentice-Hall also said it will increase its quarterly dividend to 48 cents a share from 46 cents, payable Dec. 3 to stock of record Nov. 19.
Dillon, Read & Co., Prentice-Hall's investment banker, has been actively seeking a friendly suitor for the company. One source said several domestic and foreign companies, both in publishing and non-publishing businesses, have expressed interest in Prentice-Hall. Takeover experts are divided on the subject. One said, "There's room for a sharp bidding contest here." Others, however, questioned whether a company of Prentice-Hall's size and relatively limited publishing and information services operations could command a much higher price than G&W offered.
Under its agreement with Prentice-Hall, Dillon Read gets a flat fee of $375,000. But the investment banker gets an additional 5% of any amount over $70 a share. Thus, if it produces an offer of $71 a share, Dillon Read would be entitled to about $500,000 in additional fees.
Though Prentice-Hall is seeking a higher bidder, sources close to the company indicated the publisher wouldn't resist G&W if it emerged with a higher offer. Prentice-Hall, in its statements and Securities and Exchange Commission filings, didn't say that it opposed G&W, only that its investment banker had determined it could get a better price. In a letter to Prentice-Hall directors, Dillon Read said the G&W price was inadequate based on Prentice-Hall's historical market price and trading volume data, information on certain other tender offers and mergers and financial information on companies in businesses comparable to Prentice-Hall's.
One source close to Prentice-Hall said Prentice-Hall management would have been more receptive to G&W had it acted in a less "heavy-handed" manner in proceeding with its tender offer before Prentice-Hall's board finished evaluating it. But as previously reported, G&W filings with the SEC show G&W was rebuffed numerous times over a four-month period on several attempts to discuss a friendly merger with Prentice-Hall. Prentice-Hall executives only agreed to meet with G&W executives after G&W made it clear it would proceed with a tender offer.
According to a filing with the SEC, Prentice-Hall's top officers and directors were granted severance agreements providing lump-sum payments if their employment is terminated within one year because of a change in control of the company. Such "golden parachute" clauses are typical in takeover fights.
The severance agreements provide that 10 of the 13 executives and directors would receive lump-sum payments equal to a maximum of three times each executive's average annual taxable compensation during the five-year period prior to any change in control; the remaining three would receive a fixed amount. The agreements would go into effect if the company is merged or sold; if the stockholders approve a plan of liquidation or dissolution of the company; or if any party acquires 30% or more of the company's stock.
The highest payment under the "golden parachute" agreement would be made to Prentice-Hall's chairman and chief executive officer, Donald A. Schaefer, who would receive about $480,000.
But Mr. Schaefer would be entitled to an additional $465,000 under a second provision granted by the board. Prentice-Hall's board amended the company's long-term incentive and bonus plans to accelerate the payments in benefits under those plans in the event of a change in control of the company.
According to Prentice-Hall's latest proxy statement, Mr. Schaefer's 1983 salary was $214,539 and he earned an additional $75,250 in deferred compensation and bonus.
Including Mr. Schaefer, six executives and directors would thus be entitled to the maximum amount that would have been payable to them under the plans had all the performance goals been achieved during a complete performance measuring period. The payments would be made regardless of whether such goals were or would have been achieved, according to the filings.
Credit: Staff Reporter of The Wall Street Journal
Copyright Dow Jones & Company Inc Nov 9, 1984