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Executive Summary

Richardson family members controlling almost 40% of Rich-Vicks would receive a bonus of approximately $38 mil. under a revised $60-per-share buyout offer from Unilever submitted Sept. 26. As of Sept. 24, the family had increased its stake in the company to approximately 36.2% or 6.42 mil. shares out of 17.73 mil. shares outstanding. At the new price, their shares would be worth about $385 mil., or roughly $38 mil. more than they would at $56 per share. At Unilever's original $54 a share offer several weeks ago, the Richardson family's shares had a value of $314 mil. The family's current position includes 600,000 additional shares purchased at an average price of $48 a share (a total of $28.8 mill. Subtracting the costs of these extra shares, the Richardsons are being tempted by an offer worth about $42 mil. more to the family than Unilever's starting bid. Announced in a Sept. 26 press release, Unilever's new $1.06 bil. cash offer is contingent upon approval of the Rich-Vicks board, as was the previous offer at $56 a share. "If the offer is not approved the price per share continues to be $48," the company stated, referring to the earlier two-tier provision. According to the release, the deadline for the offer is midnight, Oct. 11. The new offer appears to be an effort by the Anglo-Dutch conglomerate to present its takeover initiative in friendly terms. The premium represented by the $60 per share bid maintains the pressure on family shareholders. Despite the increase in price per share, the new Unilever offer has total cash value less than the $56 a share proposal, which added up to $1.14 bil. The difference is because of recent action taken by Rich-Vicks to buy back shares of its own stock on the open market. Rich-Vicks has consistently resisted Unilever's takeover effort. On Sept. 9, Rich-Vicks declared a preferred stock dividend which would have conferred increased voting rights to long-term stockholders. Unilever filed suit in Brooklyn Federal Court and was granted relief when Judge Richard Owen issued a temporary restraining order on Sept. 19 preventing Rich-Vicks from distributing the new stock. Rich-Vicks has also been actively acquiring its own shares. On Sept. 22 the company announced that its board had determined "to increase the number of shares of common stock which the company is authorized to purchase in open market or privately negotiated transactions to 7 mil. shares." Noting that as of Sept. 20 it had essentially completed a previously announced buyback of 5 mil. shares, the company said its board "increased the funds authorized for such purchases to $350 mil. from $300 mil." A 7 mil. share purchase by the company would reduce to 16.35 mil. the total number of shares outstanding based on the Aug. 31 figure of 23.35 mil. shares, and automatically increase the Richardson family's ownership in the company as a percentage of outstanding stock. Meanwhile, the family has been increasing the number of shares it owns, having purchased roughly 600,000 shares in recent weeks, according to filings with the Securities & Exchange Commission. The significance of these recent purchases of Rich-Vicks stock by both the company and the Richardson family might be diminished; however, should Judge Owen grant Unilever a preliminary injunction barring the voting of Rich-Vicks shares purchased after Sept. 6. A hearing was scheduled for Sept. 26, but Owen deferred making a final decision.

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