Anderson, Clayton & Co., a Houston food company, has alleged in a federal lawsuit that two New York investment banking firms and Quaker Oats used confidential information to devise a plan to "bust up" the company.
Anderson, Clayton, the maker of Gaines dog food, Seven Seas salad dressing and Chiffon margarine, is fighting a $655-million takeover announced last week by two investment firms, Bear, Stearns & Co. and Gruss & Co. The investment firms plan to sell Anderson, Clayton's Gaines dog food business to Quaker Oats to help finance the $54-a-share takeover deal.
Details of Anderson, Clayton's lawsuit were disclosed Tuesday as its shareholders began voting on a $45-a-share recapitalization plan that, if approved, could derail the Bear, Stearns and Gruss offer. Anderson, Clayton said it will not know the results of the voting until all the proxies are in Thursday.
In the suit, filed in federal court in Houston, Anderson, Clayton said it gave confidential information about Gaines to Quaker Oats this spring after Quaker expressed interest in buying Gaines. Quaker did not make a firm offer for the dog food business at the time, Anderson, Clayton said.
Allegedly Used Information
Anderson, Clayton charged that Bear, Stearns and Gruss later approached Quaker with a plan to buy the whole company and sell off chunks of it as part of a "bust-up scheme." Bear, Stearns and Gruss used confidential information obtained from Quaker Oats to devise their $54-a-share bid, Anderson, Clayton alleged.
Bear, Stearns and Gruss have said they have no plans to sell off any other Anderson, Clayton businesses, although they have not ruled out the possibility. However, Don C. McDonald, legal vice president of Anderson, Clayton, said in a telephone interview Tuesday that "we've heard from other companies who have been approached as possible buyers" for Anderson, Clayton businesses. McDonald declined to provide details.
Anderson, Clayton also alleged that a former employee of the company's banker, Manufacturers Hanover, who received confidential information about the company, now works for Bear, Stearns.
The Houston food company also said that the bidders violated federal securities laws by failing to make full disclosures about their stock purchases and charged that Quaker Oats violated federal securities laws "for failing to make any filings (with the Securities and Exchange Commission), even though it is obviously acting in concert with the others."
In New York, a spokesman for Bear, Stearns and Gruss had no comment on the lawsuit. Quaker spokesman Ronald Bottrell said the lawsuit was "a bit hasty," adding that "we hope that after they have a chance to reflect on the charges, they will withdraw them."
Anderson, Clayton also alleged that a combination of Gaines with Quaker would violate antitrust laws, since Gaines has 45% of the moist dog food market and Quaker's Ken-L-Ration has 28%. However, Quaker Oats said it does not believe that a Gaines acquisition would raise antitrust problems, since moist dog food accounts for only 4% of the $3.1-billion dog food market.
As previously reported, Bear, Stearns and Gruss said their offer depends on Anderson, Clayton's abandonment of its recapitalization plan. At the special shareholders meeting in Houston on Tuesday, W. Fenton Guinee, Anderson, Clayton's president and chief executive, said that the company's board of directors "will consider any valid, real, unconditional offer" but that "there isn't any unconditional offer available to the shareholders of Anderson, Clayton."