Storer Communications said Monday that it has spurned a buy-out offer and instead will begin an offer early next week to buy 3 million, or 18%, of its own shares outstanding.
The Miami-based broadcasting and cable-TV company said it will eventually make a second tender offer for up to 3 million more shares, although it provided no timetable. In both instances, Storer said it will offer shareholders $40 in cash and 10-year notes with a face value of $60 per share. The stock purchases are contingent on Storer arranging bank financing for the cash portion, or $240 million.
Some analysts estimated that the discounted, or current, value of the 10-year notes would be about $51 to $54. If those estimates are valid, the indicated value would range from $91 to $94 per share, although analyst Paul Kagan placed the offer in a lower range of $81 to $90.
The stock repurchase plan is one of several options that Storer has weighed since an investor group announced last month that it would try to liquidate the company. The insurgent shareholders, led by a New Jersey-based investment firm called Coniston Partners, have launched a fight for control of the Storer board, with a vote scheduled May 7 at the annual meeting.
Paul Tierney, a principal in Coniston Partners, called the Storer tender offer "totally inadequate" and said, "we intend to press forward with our proxy contest." The Coniston group has scheduled a meeting for Storer investors today in New York.
Storer also disclosed that it had rejected a buy-out proposal by Kohlberg, Kravis, Roberts & Co., which would have paid $75 per share in cash and $25 in preferred stock.
The offer was contingent on arranging about $1.8 billion of debt financing.
Analysts reacted skeptically late Monday to Storer's repurchase plan, objecting not to the price--which they found comparable to the Kohlberg Kravis offer--but to the fact that fewer shares can be tendered. One analyst, who asked not to be identified, predicted that shareholders "will take (the Storer offer) and (then) vote for Coniston."
"I don't think it will be sufficient to win the proxy battle," said Paul Kagan, a broadcasting and cable TV consultant who owns several thousand shares of Storer stock, and has--in his words--"leaned toward management" in the fight for control.
Storer officials declined to comment on reports that the company also has been approached by Tele-Communications and two partners with a friendly takeover offer.