After two days of silence in the face of an unsolicited takeover bid, record and video retailer Wherehouse Entertainment on Thursday rejected out of hand a proposed meeting with Shamrock Holdings to discuss its $14.25-a-share bid.
Louis A. Kwiker, president and chief executive of Torrance-based Wherehouse, said the board determined that "now is not the time to sell the company and that significantly higher value can be achieved by the company continuing to pursue its business plan."
Meanwhile, Shamrock indicated Thursday in a filing with the Securities and Exchange Commission that it has boosted its stake in Wherehouse to 867,700 shares, or 10.17%, from the 567,500 shares, or 6.65%, held as of Oct. 7. Shamrock is an investment company in Burbank that is controlled by the family of Roy E. Disney, nephew of the late Walt Disney.
"We're very serious (about buying Wherehouse)," Clifford A. Miller, a Shamrock spokesman, said Thursday. "We're disappointed that they apparently don't want to chat with us. The invitation is still open. Obviously, we're reviewing our options, which we believe are considerable."
In a letter to Kwiker dated Oct. 12, Stanley P. Gold, Shamrock president, said the company would be prepared to raise its cash offer "if additional value in Wherehouse can be demonstrated." Miller said a higher bid therefore would not be in the offing unless the two parties get together.
Hurt by Thefts
Shamrock's bid for the approximately 7.7 million outstanding Wherehouse shares that it does not now own would be worth about $112 million. Wherehouse operates about 200 stores in five Western states, primarily in California. It had sales last year of $225.4 million.
Industry analysts said Wherehouse's move confirmed their expectations that the independent-minded Kwiker would not willingly let go of his company, which he has been nursing back to financial health in the last two years. The company's earnings have suffered because of the theft of millions of dollars in videocassettes, the costs of opening new stores and computer problems.
"In his mind, he has laid the groundwork for future growth and doesn't want to give up the upside," said Steven Rosenberg, senior analyst with Paul Kagan Associates, a Carmel, Calif., firm that follows the entertainment industry.
Keith E. Benjamin, an analyst with the New York investment firm of Silberberg, Rosenthal & Co., said he would put a value of as much as $20 a share on Wherehouse, given its strong image and valuable store locations and fixtures.
However, he acknowledged that the company has been slow in bouncing back. Earnings for the first six months of this year fell 74% to $909,000 from $3.5 million, despite a 31% jump in sales.
Wherehouse has also been beset by management turmoil of late. Richard H. Chapin, senior vice president and chief financial officer, was quietly fired about a month ago.
Wherehouse shares rose 12 1/2 cents, to $13.375, on the American Stock Exchange on Thursday.