Hanson Trust PLC, the London-based conglomerate, moved aggressively to win the battle for control of SCM Corp. yesterday by offering $629.7 million for the two-thirds of SCM that it does not already own.
Hanson's cash offer of $75 a share for the company that makes Smith-Corona typewriters exceeds the $74-a-share leveraged buyout bid from Merrill Lynch and some members of SCM management that SCM's board of directors approved last month. The Merrill Lynch proposal consists of $59.20 a share in cash and $14.80 a share in securities known as junk bonds, making it clearly inferior to Hanson's all-cash proposal, Hanson said yesterday.
"SCM is paying Goldman Sachs $7 million to find the highest bidder; it is odd we have never even had a call," said Robert Pirie, president of Rothschild Inc., Hanson's investment banker. "I know what is best for SCM shareholders is our offer. SCM management is trying to get the company for itself, regardless of the price for shareholders, but at some point it has got to stop."
In the leveraged buyout approved by SCM last month, Merrill Lynch and some members of SCM management would buy the company from stockholders using a combination of cash and borrowings. They would reduce the debt over time through the sale of some assets and SCM's cash flow. The leveraged buyout was proposed after SCM received a hostile takeover bid from Hanson.
Merrill Lynch is eager to complete this acquisition after several unsuccessful attempts to carry out major leveraged buyouts, sources said. However, Hanson's financially superior bid and large stake in SCM could make it difficult for Merrill Lynch. Hanson owns 32.1 percent of SCM, enough stock to block the Merrill Lynch plan, which requires approval of two-thirds of SCM stockholders, according to Sir Gordon White, chairman of Hanson Trust North America.
Hanson said its $75-a-share takeover bid is subject to SCM's breaking certain agreements with Merrill Lynch that are designed to discourage competing proposals. The most important of these "lock-up agreements" is SCM's agreement to sell Merrill Lynch its pigment and food businesses for about $430 million if a rival bidder acquires a one-third stake in SCM. Rothschild President Pirie said yesterday those businesses are worth between $600 million and $700 million.
SCM agreed to sell these businesses to Merrill Lynch if a competing bidder acquires one-third of SCM to discourage rival takeover bids. This agreement, designed to lock up the Merrill Lynch buyout, is the reason why Hanson has not lifted its stake beyond 32.1 percent.
SCM had sales of about $2.2 billion and net income of $41.8 million in the year ended June 30, 1985, versus sales of nearly $2 billion and net income of $41.7 million in the prior year. SCM's best known consumer products are Smith-Corona typewriters, which are manufactured in Singapore and the United States. SCM also owns the Durkee Famous Foods Group, which sells a variety of products under "Durkee" and other labels. SCM is the second-largest full-line spice processor and distributor in the nation after McCormick & Co. Inc. of Hunt Valley, Md.
Hanson, which withdrew a $72-a-share takeover bid last month after Merrill Lynch announced the leveraged buyout plan, is a conglomerate with significant interests in Great Britain and the United States. The company had sales of about $3 billion and net income of $159 million last year. The company's better-known businesses in the United States are Hygrade Food Products, which sells Ball Park hot dogs; and Endicott Johnson, which is a manufacturer and retailer of shoes. In Great Britain, Hanson operates department stores, airport duty-free shops and British Ever Ready, the leading dry cell battery maker. Its London Brick unit is also an industry leader.