NEW YORK — Seven months after pocketing $43 million for aborting its hostile takeover attempt on Gillette, Revlon Group renewed its pursuit in a shrewd maneuver that analysts said seriously threatens Gillette's independence.
Gillette's board moved quickly Thursday to try to quash the latest $4.6-billion takeover offer, which was contained in a two-page letter from Revlon Chairman Ronald O. Perelman dated June 16.
Revlon, the New York-based cosmetics giant, needs the consent of Gillette's board to proceed with its proposal under a "standstill agreement" that the companies reached at the end of the first takeover battle in late November.
During a 3 1/2-hour, regularly scheduled board meeting at Gillette's headquarters in Boston on Thursday afternoon, the board rejected Revlon's request for consent to launch a friendly offer of at least $40.50 a share, which is almost 25% more than Revlon's earlier offer.
Sharing Wall Street's initial view that the solicitation was more a money-raising scheme than a serious takeover effort, the Gillette board dismissed the offer as a ploy to draw other bids.
Noting the unusual activity in the company's stock this week, Gillette's board authorized its lawyers to sue if they determine that Revlon has violated the standstill agreement.
Last November, Gillette thwarted Revlon's initial $4.16-billion takeover effort by repurchasing Revlon's 14% stake in Gillette at an above-market price of $29.75 a share.
In addition, Gillette and Revlon reached the standstill agreement, to be effective for 10 years. But the agreement contains a price protection provision that could allow Revlon to reap an additional windfall if the company is purchased by someone other than Revlon.
The provision states that if Gillette accepts a buyout before Nov. 24 for more than $29.75 a share, Gillette would have to pay Revlon the difference between the buyout price and $29.75 for each of the shares that Gillette repurchased from Revlon.
Revlon, hoping to persuade skeptical Wall Street analysts that it is serious about wanting Gillette, quickly countered the Gillette board's Thursday announcement with an offer to waive the price protection provision in exchange for permission to pursue the $40.50 a share offer.
Gillette said it would have no further comment until it had received Revlon's offered waiver in writing.
Analysts viewed the board's decision to reject Perelman's overture as a huge gamble.
Seen as Inadequate
Even though many analysts regarded the $40.50 a share price as between $2 and $4.50 a share too low, they noted that some shareholders are still irate over Gillette's handling of the first Revlon offer. Not only did they not get to share in the premium that Gillette gave Perelman to thwart his bid, but shareholders saw the value of their Gillette stock plunge after Revlon withdrew.
"Shareholders felt slighted and some sued when Gillette paid (Revlon) the greenmail, and they would scream if the company says no again," predicted Margaret Rak, an analyst with Argus Research in New York.
Rejection of the current Perelman offer would particularly rile shareholders because it is for $8 a share more than the earlier one, is an all-cash offer and is backed by cash from a consortium of lenders led by Citibank.
Analysts said that Revlon's offer to waive the price protection provision in the standstill agreement further puts pressure on Gillette to accept that offer or to seek a white knight, a prospect that is almost certain to be easier now than it was last year.
With Revlon on the attack last fall, Gillette's investment bankers beat the bushes for a white knight to rescue it and came up empty-handed. But since then, the company has undergone a costly corporate restructuring that has left it with much more debt but also much leaner and with much better cash flow, analysts said. The company cut its worldwide staff by 2,400 people, or 8%.
Wall Street analysts pronounced the Revlon offer a devious attempt by Perelman--who is widely hailed as one of Wall Street's shrewdest financiers--to raise money at Gillette's expense.
"I don't think he wants Gillette. He's in the process of buying back his own company and he's making a lot of acquisitions, and I think he just wants to raise some money," said Lynn R. Hyman, an analyst who follows Gillette for the E. F. Hutton investment firm.
Added Rak, the Argus analyst: "I think Perelman is just very greedy. He saw Gillette as an easy way to make money once before, and he thinks he can get money out of them again."
The price protection provision gives Revlon a strong incentive to start a bidding war for Gillette. Mere rumors of a renewed takeover battle have added almost $10 a share to the stock's price in less than three weeks, which would give Revlon about $200 million if the price-protection clause were invoked.