REVLON SEEKING TO RAISE $250 MIL. CASH THROUGH SALE OF "CERTAIN ASSETS"; FIRM BEGINS 10 MIL. SHARE STOCK BUYBACK IN EFFORT TO FOIL PANTRY PRIDE TAKEOVER BID
Revlon's plan to sell off certain assets worth about $250 mil. is a key element of the firm's defense strategy against Pantry Pride's hostile takeover attempt. Revlon announced its plan on Aug. 26. "The Board, as part of Revlon's previously announced program to enhance shareholder values, has authorized the sale of certain assets with the objective of realizing $250 mil.," the company stated. While Revlon has not yet indicated which assets it intends to sell, its health care segment offers several businesses that because of their size and nature might be more readily divested than one of the cosmetic groups. These operations include: drug businesses USV and Armour, with 1984 U.S. sales of $235 mil.; OTC health care businesses Norcliff Thayer and Reheis, with sales of $247 mil. in 1984; vision care businesses Barnes-Hind, ContinueCare and Coburn, with $226 mil. in sales in 1984; and diagnostic businesses Technicon -and National Health Labs, with 1984 sales of $415 mil. Rumors emerged on the "Street" late last week that Norcliff Thayer could be the most likely candidate for divestiture. Analysts indicated that with 1984 sales of $150 mil. and operating earnings of roughly $20 mil., Norcliff Thayer might be able to fetch between $170 mil. and 180 mil. Revlon's principal defense against the Pantry Pride takeover bid, announced Aug. 26 and commenced Aug. 29, is an exchange of securities with a face value of $57.50 for up to 10 mil. shares of outstanding common stock. This doubles a previously announced objective of repurchasing 5 mil. shares ("The Pink Sheet" Aug. 23, p. 6). Under the plan, devised with the help of investment banker Lazard Freres & Co., Revlon will exchange roughly 26% Of shareholder equity for debt, and thereby double its long-term obligations from $468 mil. to $942 mil. At the same time equity will drop to approximately $560 mil. from $1 bil., causing the firm's debt-equity ratio to jump from 50%0 to 170% The new securities will consist of $47.50 principal amount of 11.75% senior subordinated notes due 1995 and one-tenth of a share of Revlon's $9 cumulative convertible exchangeable preferred stock with a stated value of $100 per share. Each share of preferred stock is convertible, at the option of the holder, into 1.739 common shares. By saddling the company with senior long-term debt, the plan may effectively deter potential investors from purchasing the "junk" securities Pantry Pride intends to issue to finance the takeover. In an Aug. 29 filing with the Securities and Exchange Commission, Revlon predicted that after the restructuring it will earn $282 mil., or $7.68 a share, in 1985, and $116 mil., or $3.68 a share, in 1986. The 1985 figure includes a $160 mil. after-tax gain on the planned sale of assets. Sales for 1985 and 1986 were forecast at $2.41 bil. and $2.48 bil., respectively. Revlon said that the exchange offer is designed "to defeat the Pantry Pride offer, which is subject to the condition, among others, that Revlon shall not make any changes in its capitalization." In addition, the company stated, "certain provisions of the Revlon securities to be exchanged may adversely affect Pantry Pride's ability to consumate its offer." Rejecting Pantry Pride's earlier $47.50 per share offer as being "highly conditional and totally inadequate," Revlon Chairman and CEO Michel Bergerac stated: "Revlon's fortunes are in an upturn and we're not going to allow anyone to block our shareholders from receiving the excellent benefits and higher values inherent in our program."
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