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Not for Sale, Gerber Says, as Rumors of Takeover Boost Stock

July 30, 1987|JUBE SHIVER Jr. | Times Staff Writer

Gerber Products' stock, buoyed all summer by persistent takeover rumors, advanced strongly again on Wednesday as speculation intensified that a major food processor might launch a bid for the world's largest producer of baby foods.

In trading on the New York Stock Exchange, Gerber shares rose $5.50 to close at $61.50, far surpassing its record price of $57.625 in April, 1986. The jump in price had Wall Street buzzing with names like Quaker Oats and General Mills as possible purchasers.

However, Gerber officials reacted sharply to the reports of a possible takeover, saying the company is not for sale.

"We said in our annual meeting last week that we intend to stay independent," said Carl G. Smith, acting chief executive of Gerber. "The company is not for sale."

Anyone seeking to take over Gerber would have to overcome a number of anti-takeover defenses adopted by the company. Moreover, nearly 15% of Gerber is owned by insiders.

But analysts say at least half a dozen buyers might be interested in Gerber because it dominates the baby food industry, yet is a relatively small company whose performance might be improved by better management.

The list of rumored purchasers includes Quaker Oats--which owns a nearly 5% stake in Gerber, as well as General Mills, Nestle, Ralston Purina and a new company formed by Chicago-based BCI Holdings. The new company, called E-II Holdings, was set up in May to acquire food concerns that complement the giant Chicago consumer products company.

Gerber has been without a permanent chairman since May 27, when William L. McKinley, the 63-year-old chairman and chief executive, abruptly announced that he was taking early retirement. At the time, there was some talk that he was forced out by directors because of what they considered unsatisfactory performance.

The company turned to Leo D. Goulet, 61, president and chief operating officer, who had appeared in television commercials last year with his infant granddaughter to counter public fears of glass shard contamination in Gerber baby food. Goulet was named to the additional post of chief executive in May and was to assume the chairman's post at the company's annual meeting July 22.

However, he suffered a heart attack and died July 5 while playing golf near his home in Fremont, Mich. The company then named 66-year-old Smith, who was Gerber's chief executive from 1983 to 1985, as acting chief executive.

Since then, takeover speculation has been fueled by a perception that the food company--without a permanent chief executive--might not be able to quickly defend itself from a hostile takeover bid.

In McKinley's final stint at Gerber, earnings dropped 20% for the year ended March 31, largely as a result of unsubstantiated reports that glass shards were found in Gerber baby food jars. Gerber's furniture and children's clothing business also took a beating from imports last year, analysts said.

Sales and earnings improved, however, in the first quarter ended June 30, Gerber said, citing a 21% increase in baby food sales over the first quarter last year.

Gerber directors are scheduled to interview three candidates for the two posts this week, according to Gerber director Raymond A. Weigel. However, both Weigel and Smith declined to say how soon the posts might be filled.

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