Textron Corp., the Providence, R.I.-based company that became one of the nation's original conglomerates, said yesterday it had received an unsolicited takeover bid valued at more than $1.55 billion from Chicago Pacific Corp., and called the offer unsatisfactory and unwelcome.
Textron Chairman Robert P. Straetz said the offer, received in a letter Tuesday, was made without consulting him. He will recommend that Textron's directors reject it, apparently setting the stage for a tender offer contest.
Chicago Pacific, the successor to the Chicago, Rock Island and Pacific Railroad Co., emerged from bankruptcy last June. The company, flush with cash from its continuing liquidation of the railroad, is aggressively looking for acquisition candidates, and indicated it would not be deterred by resistance from Textron management.
In its letter, Chicago Pacific proposed to buy all of Textron's common stock for $43 a share in cash, plus cash for all of Textron's preferred shares depending on the price at which it can be converted into common. Textron has about 36.5 million common and preferred shares outstanding.
The offer sent Textron's stock up 5 points yesterday to 41, and it was the second most actively traded issue on the New York Stock Exchange. Textron gained 2 1/8 on Tuesday on unusually heavy volume. Chicago Pacific stock fell 2 3/4 yesterday to 84 in reaction to the announcement.
Textron Chairman Straetz said the company has a bright future, and that its shareholders, employes and customers would be better served if Textron remains independent. He also said he does not understand how Textron's businesses would benefit from a combination with Chicago Pacific.
Textron, established as a textile firm in the 1920s, began diversifying in the early 1950s when its founder, Royal Little, entered unrelated businesses to lessen fluctuation in earnings caused by cyclical swings in the economy. The company, with about 145 plants in 20 countries and more than 45,000 employes, had 1983 sales of almost $3 billion and profits of $88.7 million ($2.40 per share).
The multinational company's operations include Bell Helicopter, Speidel watchbands, Homelite power equipment and Jacobsen lawn, snow and garden equipment.
Chicago Pacific indicated yesterday that it will aggressively pursue the takeover. "While our present thinking is that the transaction would be structured as a cash merger with management approval , if it would better accomplish our mutual objectives, we are prepared to initiate a cash tender offer," said Chicago Pacific Corp. Chairman Harvey Kapnick.
Chicago Pacific has retained the investment banking firm of Lazard Freres & Co. as its adviser in the takeover attempt. Chicago Pacific has a commitment from Citicorp to act on behalf of a group of lenders to finance the proposed transaction, the company said.
Chicago Pacific was formed in 1847 and grew to be the nation's 12th largest railroad, serving much of the Midwest. It filed for bankruptcy in 1975, and U.S. Judge Frank McGarr ordered in 1980 that the railroad be liquidated after attempts to keep it operating failed.
"The continuation of your management and other employes is important to us, and we are prepared to work with you to insure that they are enthusiastic and fully motivated to continue with the enterprise," the letter to Textron said.
The Chicago Pacific proposal said Textron Chairman Straetz and Textron President Beverly F. Dolan would be elected to the Chicago Pacific board of directors, with Straetz serving as chairman of the executive committee and Dolan as president of the merged company.