Revlon Inc. was the most heavily traded company on the New York Stock Exchange yesterday as investors reacted to a hostile, $1.9 billion takeover attempt by the much smaller Pantry Pride Inc.
More than 3.6 million shares changed hands, but the price rose only 1/2 to $46.12 as analysts suggested Pantry Pride would have a hard time overcoming Revlon's aggressive anti-takeover tactics. Pantry Pride sources said the company was not separately purchasing Revlon shares in advance of its $47.50-per-share tender offer.
One outcome could be a takeover of Revlon by a third firm, analysts said, although they added that Revlon Chairman Michel Bergerac seemed to mean it when he said the company is not for sale.
The heavy trading "is probably because of some speculation that perhaps someone else will come along and make a white-knight bid," said Eileen Gormley, an analyst with Thomson McKinnon Securities. The slight change in price at closing probably reflected investor doubt that Pantry Pride could pull the deal off, Gormley said.
Deepak Raj, an analyst with Merrill Lynch, Pierce, Fenner & Smith, pointed out that the stock of Revlon -- which has been rumored as a takeover candidate for some time -- has been rising steadily for the last few months. Share prices were 22 percent higher at the end of July than they were at the beginning of the year, he said.
Under the takeover proposal made Monday, Pantry Pride would pay $47.50 for each of Revlon's 38.3 million common shares and $26.67 for 100,000 preferred shares. The deal would be financed by $750 million in cash and marketable securities and $500 million in credit from banks. The balance, at least $700 million, would be raised from public issuance of debt securities, the company said.
That as-yet unfinanced aspect of the takeover, as well as the defenses mounted by Revlon, caused analysts to be skeptical.
"I don't think their offer has any chance of success," said Joseph Kozloff, an analyst with Dean Witter Reynolds. Other analysts said that Pantry Pride would have to raise even more outside money if it had to bid higher for Revlon's shares.
Sources close to Pantry Pride said the company has not begun independent efforts to purchase Revlon stock on the open market, and that details of the tender offer probably would be available on Friday.
Pantry Pride may be most known by consumers for its chain of supermarkets, but the parent company agreed to sell the last of those in July. The last year has seen significant changes in Pantry Pride, which filed for Chapter 11 bankruptcy in 1978. During its fiscal year ended July 1984, the company earned about $10 million on sales of $770 million.
In December, a group of dissident stockholders tried unsuccessfully to oust existing management, and earlier this year Pantry Pride in effect sold a controlling interest to MacAndrews & Forbes Holdings Inc., a film-processing and food-flavoring company. Now, with Pantry Pride reported to have put up for sale its home-center and drug chains, analysts say little remains of the original firm. Its chief "asset" is $330 million in tax losses carried forward.
Revlon, which had engaged in discussions of a friendly merger with Pantry Pride, responded to the takeover-attempt announcement Monday with two preventive measures. The company will buy back 5 million of its own shares. And, in a ploy known as a "poison pill," it will let stockholders turn in their shares for a one-year note worth $65 each and yielding 12 percent if a hostile bidder acquires more than 20 percent of the outstanding shares.
The company also filed suit against Pantry Pride in federal district court in Delaware, accusing it of violating federal securities laws.
Revlon, known principally for women's cosmetics, actually sells and earns more money from health-care and health products, including medical equipment and contact lenses. In 1984 it earned $112 million on sales of $2.4 billion.
The company has been hit by losses in its international operations in the last few years because of the strength of the dollar and what some analysts called "neglect" of the cosmetics side of the business.
Bergerac spoke out firmly against the Pantry Pride takeover, saying the company "is not for sale" and that Revlon "is not soliciting" offers. However, he was quoted as saying he would consider proposals from "somebody responsible," and Revlon Vice President Roger Shelley said that the $65-per-share price on the "poison pill" is a level at which Revlon management would consider serious offers.
Shelley and outside analysts said a prime goal of Revlon management is to keep the company in one piece, and that officials believe Pantry Pride would sell off a portion of the firm, probably the health-care operations. Revlon has a $1.4 billion war chest, including cash on hand and outside financing, to fight the takeover attempt.