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REVLON AUCTION UNDER GAVEL OF PANTRY PRIDE

Executive Summary

REVLON AUCTION UNDER GAVEL OF PANTRY PRIDE is cleared by the Oct. 31 decision of the Delaware Supreme Court to invalidate Revlon's lock-up agreements with its friendly suitor Forstmann Little. The state Supreme Court upheld a lower court's decision invalidating the lock-up arrangements and cleared the way for Pantry Pride's $58 per share cash tender offer. Shortly after the Delaware decision, Revlon indicated that its executive officers will tender their shares of Revlon to Pantry Pride. That move is the sign of the end of a two-month fight between Revlon management and Pantry Pride and its parent MacAndrews & Forbes. The upshot of the two-month fight in terms of the total value of Revlon was an $8 per share increase in value compared to initial buyout feelers in 1984 and a $10.50 per share increase above Pantry Pride's initial offer. Pantry Pride has stated its intention to market certain segments of Revlon for their divestiture value since the beginning of its takeover attempt. At one point, Pantry Pride estimated that the non-cosmetics part of Revlon could be worth nearly $1.9 bil. in the aggregate. At least two segments of Revlon have extant deals from which Pantry Pride can work for divestiture offers. American Home Products was lined up as a buyer for Norcliff-Thayer and Reheis Chemicals at the reported price of about $350 mil. That was a top offer for the combination of the two businesses. Unless Pantry Pride can find an offer for more than $100 mil. for Reheis, that offer should be sufficient for the OTC/chemical package. The leveraged buyout group, Adler & Shaykin, was in line to buy the cosmetics business for approximately $900 mil. First Boston Corp. has reportedly been trying to interest potential purchasers of Revlon in a divestiture of the company's ethical drug businesses (USV and Armour). The lock-up provision which was delaying the Pantry Pride cash tender valued two of Revlon's most attractive divisions -- vision care (Barnes-Hind, ContinuousCurve and Coburn) and clinical labs (Natl. Health Labs) -- for $525 mil. in the event of an unfriendly third-party offer. Pantry Pride's offer, valued at approximately $1.8 bil., was subject to either Revlon's dropping the lockup option or having it invalidated by the courts. The company announced after the court's ruling that it would begin buying Revlon shares tendered prior to the offer's expiration. Revlon management said that discussions are currently being held with Pantry Pride "with respect to an orderly transition."
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