Amfac, a diversified company with major interests in Hawaii, agreed Tuesday to be acquired in a $920-million deal by JMB Realty Corp., a giant Chicago real estate investor whose holdings include a big chunk of Century City.
Privately owned JMB agreed to pay Amfac shareholders $49 a share, a significant increase over the $41-a-share proposal submitted by an Amfac management-led group in May.
San Francisco-based Amfac said its board unanimously approved the proposed merger with an affiliate of JMB Realty, after a special committee of independent directors had studied a revised offer from the management group led by President and Chief Executive Richard L. Griffith.
Amfac would be the surviving entity after the merger. "The board unanimously agreed that JMB Realty's $49-per-share all-cash bid, backed by the solid financing resources of one of the country's premiere real estate and management companies, represents optimum shareholder value," Amfac Chairman Henry A. Walker said in a statement.
Amfac said Merrill Lynch, which acted as JMB's financial adviser, has committed $500 million in financing for the transaction. Amfac said its own advisers, the investment firms of Morgan Stanley and Salomon Bros., have decided that the proposal is fair to Amfac shareholders.
JMB would likely continue to shed Amfac assets under a restructuring plan that was begun last fall but abandoned after the management offer was made, some analysts said. "JMB is buying basically because of the Hawaii land," said Phua Young of Shearson Lehman Hutton.
Governor Opposes Breakup
Although it is now based in San Francisco, Amfac is one of the original Big Five Hawaiian firms that began decades ago as agents or factors for the islands' sugar producers but grew to be among a select group holding the vast majority of the state's private land.
However, Amfac has since diversified to include distributors of pharmaceuticals and electrical supplies, food-processing concerns and a chain of Hawaii department stores and specialty shops.
Hawaii Gov. John Waihee, reacting to the proposed JMB purchase, said in a statement that his office would fight any attempt to break up Amfac. Waihee made a similar threat last November, when talk of an Amfac takeover began.
Carolyn Tanaka, the governor's spokesman, said the state is concerned about the effect of the transaction on the 8,500 Amfac employees in the state, among other issues.
Reaction within the state is important, analysts said, because local officials unhappy with a new buyer could set up zoning obstacles hampering development of the Amfac land.
Amfac has already sold most of its holdings in the continental United States, including its Santa Cruz-based mushroom business, and its potato-processing and electrical supplies distribution businesses.
To Use 'Employee Resources'
A spokeswoman said an announced deal to sell its health-care division has not been completed but will proceed. The company intends to keep its Fred Harvey division, which operates resorts in the Grand Canyon and Death Valley, spokeswoman Deborah Demer said. In addition to land in Hawaii, remaining holdings include the Liberty House retailing group of Hawaii.
In his statement, Walker said Amfac intends to work closely with JMB, Amfac employees and the "communities where Amfac conducts business to facilitate the most effective ownership transition possible--reflective of Amfac's notable 139-year corporate heritage in Hawaii."
JMB assured Amfac's board that it "intends to utilize Amfac's considerable employee resources in its growth plans and to continue the company's wide-ranging involvement in Hawaii community activities," he added.
Walker said Amfac's board believes that Hawaii "will welcome JMB Realty's expertise in, and renowned reputation for, quality property development projects as Amfac proceeds with such important Hawaii real estate projects as Waikeie on Oahu and Kaanapaii on West Maui."
Just before management's buyout was proposed last spring, San Francisco-based Castle & Cooke, a diversified food processor and Hawaiian landowner, signaled a possible interest in acquiring Amfac when it disclosed that it had acquired 7.3% of Amfac's common stock.
Stock Price Dips
Castle & Cooke, controlled by Los Angeles investor David Murdock, had previously received federal antitrust clearance to buy as much as 15%. In January, Amfac turned down a proposal from Castle & Cooke to merge some of its Hawaiian property with Amfac's in exchange for Amfac stock.
Castle & Cooke executives couldn't be reached for comment Tuesday. But on Wall Street, investors signaled that they don't expect a higher bid. In New York Stock Exchange trading, Amfac closed at $47, down 75 cents. "The (speculators) are throwing in the towel on this one," Shearson's Young said.
Management's proposal, widely viewed as a means to ward off Castle & Cooke, was significantly below estimates of the company's market value and consequently investors had bid up the price in recent months. The JMB deal requires negotiation of a definitive agreement and approval by holders of 75% of Amfac's shares and government authorities.
Last year, Amfac earned $14.6 million on revenue of $2.2 billion.