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RICHARDSON FAMILY GROUP TO PURCHASE $16.7 MIL. MORE RICH-VICKS STOCK: COULD INCREASE FAMILY INTEREST TO OVER 50% AND THWART UNILEVER BID

Executive Summary

The Richardson family group's planned $16.73 mil. purchase of additional Rich-Vicks common stock, combined with the firm's ongoing buyback of five mil. outstanding shares on the open market, could give the Richardson family a majority stock ownership position that would give them a clear cut, final say on Unilever's takeover bid. The 23-member group controlled 5.97 mil. shares (or 29.3% of Rich-Vicks' 20.41 mil. outstanding) as of Sept. 18. The group disclosed to the Securities & Exchange Commission that day that it had arranged a $16.73 mil. line of credit with Bankers Trust in order to purchase additional shares. At an estimated $50 a share, the family could purchase approximately 3.35 mil. shares with the loan. Should Rich-Vicks complete its planned stock buyback, total outstanding shares would be reduced from the Aug. 31 figure of 23.35 mil. to 18.35 mil., giving the family-led group control of 9.32 mil. shares, or approximately 50.8% of the company. The Bankers Trust line of credit puts the Richardson family face-to-face against the huge Dutch Unilever group in bidding for enough stock to control Rich-Vicks. * The Rich-Vicks strategy of issuing a new class of preferred stock with increased voting rights, announced on Sept. 17, was dealt a blow on Sept. 19, when a New York federal judge issued a temporary restraining order blocking the plan. A hearing is scheduled for Sept. 26, when Judge Richard Owen will decide whether to extend the restraining order by issuing an injunction. Without the protection of the preferred stock plan, Rich-Vicks' efforts to resist Unilever's tender offer rests with the ability of the Richardson family to increase its stock holdings to more than 50%. As of Sept. 18, the group had purchased an additional 170,000 shares, while the company had deposited 2.6 mil. shares in its treasury that it had purchased on the market for $121 mil. The family group, which represents most, but not all, of the Richardson family's holdings, said in the filing that it was considering "appropriate steps to prevent Unilever from acquiring the company," including "the purchase of additional shares in the open market." In addition, the group said that it might, if necessary, "solicit the support of other members of the Richardson family who are stockholders of the company." On Sept. 16, Unilever replaced its previous $54 a share tender offer ("The Pink Sheet" Sept. 16, p. 7) with a sweetened $56 a share offer, provided the Rich-Vicks board approve the offer. The Dutch conglomerate simultaneously threatened a hostile 548 a share bid without the board's approval. In its revised offer Sept. 16, Unilever said that a minimum of 51% of Rich-Vicks shares must be tendered before midnight, Oct. 11 for the tender offer to become effective. At $56 a share, Unilever would be paying roughly $1.34 bil. for Rich-Vicks, or nearly $200 mil. more than it would at $48 a share. Within 24 hours, Rich-Vicks said its board had unanimously rejected what it called an "unsolicited two-tier offer" from Unilever. Rich-Vicks President and CEO John Scott asserted, "We will not be coerced by this tactic into taking action dictated by Unilever's interests and not those of our shareholders." To defend itself, Rich-Vicks announced at the same time that its board had also "declared a special preferred stock distribution payable to common stockholders of record as of Sept. 27 as soon as practicable after such date." The preferred stock offer, by conferring increased voting rights to existing shareholders, would effectively provide the Richardson family with a formidable position should control of the company be determined in a proxy battle. "The distribution will also afford long term stockholders greater voice in the affairs of the company and will make it more difficult for any person, including Unilever, to acquire the company on terms which the board of directors determines are not in the best interests of the company and its shareholders," Rich-Vicks stated. Rich-Vicks said that its board "reached its determination after considering a number of factors, including the advice of its financial advisors, Kidder Peabody & Co., that the conditional price of $56 per share was inadequate to shareholders." Rich-Vicks also urged shareholders not to tender their shares to Unilever because, the firm asserted, "shares so tendered might be purchased for $48 per share -- - less than the present market price." The company's stock closed Tuesday, Sept. 17 at 50-1/8, down 1-1/8. Rich-Vicks stock fell another 1-1/8 on Sept. 18 to close at 49, indicating that the financial community is taking Rich-Vicks' resolve seriously. However, significant buying by both the Richardson group and the company could push the price of Rich-Vicks stock up again in the near future. On Friday, Sept. 20 the issued closed at 46-7/8, down 2-1/8 for the week. In devising its preferred stock plan, Rich-Vicks avoided the "poison pill" defense and debt that has been adopted by other firms involved in takeover battles. Instead, Rich-Vicks has opted to increase equity, and the number of votes controlled by long-term shareholders who would theoretically oppose the Unilever proposal. Explaining the preferred stock distribution, the Rich-Vicks release noted that "one share of a new series of preferred stock (designated as Series A $4.00 Participating Cumulative Preferred Stock) will be issued and distributed for each five shares of common stock outstanding" as of the date of issuance. Cash will be paid in lieu of fractional shares, the company added. Each share of preferred stock will entitle the holder to cast 25 votes per shares on all matters submitted to stockholders, the release said. Shares acquired after the date of original issuance and held for less than 36 months would entitle holders to only five votes per share. "Persons who own shares in 'street' or 'nominee' name must provide proof to the company that they are initial holders or have been 'long-term' holders to be entitled to cast 25 votes per share," Rich-Vicks stressed. The company indicated that the distribution would result in improved quarterly cash dividends that, when announced, would consist of an amount equal to the greater of $1 per share or the product of the per share common stock divided in the previous quarter times the number of common shares issuable upon conversion of the Series A preferred stock. "The payment of future dividends will, however, be dependent on earnings, cash flow and other factors to be considered by the board at future dates," the release cautioned. "Accordingly, no assurance can be given as to payment of future levels of dividends." To accommodate the preferred stock distribution, the company said it intended to adjust the annual dividend rate for each share of common stock to 74 cents from $1.48 a share. "However, the effective annual dividend to be received by persons holding common stock and the Series A preferred stock will initially increase, based on the aggregate dividends paid on the common stock and the . . . preferred stock, from $1.48 to $1.54 per share of common stock held prior to the distribution," Rich-Vicks explained. The release noted that in the event of liquidation or dissolution of the company, holders of the new preferred stock are entitled to receive, out of the remaining net assets of the company, the greater of $125 plus accrued and unpaid dividends, and the amount which would be available to the holder of the number of common shares issuable upon conversion assuming all shares of preferred stock had been converted into common stock. According to the company, the new preferred stock would be redeemable by the company after Oct. 31, 1990 at $125 per share plus accrued and unpaid dividends to the date of redemption. Rich-Vicks added that in addition to the preferred stock distribution plan, the board "took certain actions to ensure the continuity of management, employee job security and protection of employee benefits in light of Unilever's hostile bid." Unilever's suit, which was filed in Brooklyn, New York federal court on Sept. 16, alleged that Rich-Vicks had violated federal securities law by issuing press releases that did not properly disclose that the Richardson family intended to take the company private. Referring to the Rich-Vicks preferred stock plan as an "impermissible step," Judge Owen said in his ruling that the plan requires either shareholder approval or an amendment to the firm's by-laws. If Unilever is successful in its attempt to gain control of 51% of all outstanding Rich-Vicks stock, a merger might not be immediately forthcoming, since two-third of the firm's shares must vote in favor of a merger, according to antitakeover provisions adopted by Rich-Vicks a year ago. Another potential delay is the staggered election of the Rich-Vicks board. Only five of the company's 17 directors' terms expire this year.

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