It has only two letters, but the trusty word or can sometimes cause a lot of confusion.
That was amply demonstrated Wednesday as the 3-month-old battle between Farmers Group, an insurance holding company based in Los Angeles, and Batus Inc., the U.S. arm of a British conglomerate, took a strange turn.
Farmers issued what Batus read as an ultimatum: Increase its $63-a-share offer for Farmers by 2 p.m. New York time or get lost. But Farmers later said it was nothing of the sort.
In a letter delivered to Batus representatives in New York shortly before midnight Tuesday, Farmers Group Chairman and Chief Executive Leo E. Denlea Jr. said: "If you wish to schedule a meeting with us, please advise by 2:00 p.m. New York time, on Wednesday. Unless we hear from you by such time that you want a meeting, \o7 or \f7 of any higher price you wish to offer, we will act on the assumption that you do not wish a meeting and that you have no higher price to propose."
Louisville, Ky.-based Batus, a subsidiary of London-based tobacco and retailing giant BAT Industries, interpreted the "or" as an "and," and read the letter as an ultimatum. Shortly before the deadline expired, Batus replied publicly with a statement to Farmers beginning: "Batus Inc. said Wednesday that its chairman, Patrick Sheehy, has received a letter from Leo Denlea, chairman of Farmers Group Inc. requesting that, by 2 p.m. today, Batus set a price it is willing to pay for Farmers shares."
The three-paragraph reply quoted Sheehy as objecting again to the terms of a secrecy agreement proposed by Farmers as a condition for Farmers' sharing confidential business information.
But Charles L. Schultz, Farmers' senior vice president for finance, said Wednesday afternoon that Batus was mistaken in treating Denlea's letter as an ultimatum. "What Mr. Denlea said was if you wish to schedule a meeting with us, please advise by 2 p.m. Wednesday," he said.
When informed of Schultz's remarks, Batus spokesman Toney File replied: "You're kidding me. I am surprised. . . . I don't find that anywhere in the letter. Oh well, isn't that interesting."
File, who participated in writing the Batus reply, said it did not occur to him or Batus attorneys that Farmers was simply asking again to meet. Batus had been asking for a meeting for a long time, he pointed out.
Sheehy even wrote a letter to Denlea on Tuesday that began: "With respect to your letter of April 11, we would be very pleased to meet with you concerning our offer."
Schultz said Batus' letter Tuesday had demanded changes in the confidentiality agreement proposed by Farmers. The real purpose of Denlea's letter then was to say that Farmers was willing to meet with Batus without reaching such a secrecy agreement and without initially sharing confidential business information, he said. "The confidentiality agreement is not a condition precedent to a meeting."
The confusion was complicated by the insistence until late Wednesday by Farmers' outside public relations firm that the deadline applied both to agreeing to meet and to making a higher bid. "The deadline was set for both of these events, whether it's 'and' or 'or,' " a spokeswoman in New York said.
Lawyers Still Arguing
Farmers Group stock closed down 12.5 cents at $64.875 on Wednesday in over-the-counter trading of 1.5 million shares.
Farmers is the nation's third largest home and auto insurer. Batus owns Saks Fifth Avenue and the tobacco company that makes Kool cigarettes.
Meanwhile, lawyers for Batus and Farmers continued to argue on Wednesday over the terms of the confidentiality agreement, with both sides still refusing to publicly release the document. But both Denlea's letter and Sheehy's letter have given hints of the dispute.
Sheehy's letter on Tuesday, a copy of which was filed with the Securities and Exchange Commission, said Batus wanted to delete two paragraphs of the agreement containing "stand-still" provisions. Such provisions restrict a suitor from buying stock in a takeover target company.
Sheehy said Batus might agree to some form of stand-still provisions if Farmers agreed not to establish a "poison pill"--an anti-takeover defense that takes effect when a hostile bidder takes a certain stake in a company--and promised not to reach a special anti-takeover agreement with another company.
In reply, Denlea wrote that Farmers had "obtained a confidentiality agreement from each person to whom Farmers has provided confidential information, which is no less stringent than that we have requested of BAT and Batus."
Denlea refused to accept limits on Farmers' ability to negotiate agreements with other companies, while adding: "In any case, Farmers would not utilize a 'poison pill' or other defense in the face of an adequate offer that is in the best interest of Farmers and its stockholders."