Heilig-Meyers Co. of Richmond, a major furniture retailer, yesterday launched an unfriendly $41 million takeover bid for Sterchi Bros. Stores Inc., which operates 73 furniture stores in the Southeast.
Heilig-Meyers offered $31 a share for the 1.320 million shares of Sterchi stock in a surprise move that sent Sterchi shares soaring to $32.25, up $10.13, or 45.8 percent, for the day. Heilig-Meyers closed at $33.25, up 50 cents.
Both firms are listed on the New York Stock Exchange.
Sterchi officials, in a formal statement, said they would evaluate the Heilig-Meyers offer and make their position known by Jan. 24. In the meantime, they asked Sterchi stockholders to defer any decision on the Heilig-Meyers offer. Sterchi officials could not be reached for comment.
Heilig-Meyers asked Sterchi to provide a list of shareholders so they could transmit their offer directly.
Troy A. Peery Jr., chief financial officer of Heilig-Meyers, said his firm wanted to buy Knoxville, Tenn.-based Sterchi because "they're in the exact same business, in the same kinds of towns, with the same kind of stores. They would be a very good fit."
Peery said he had called Sterchi officials on Dec. 26 to try to set up a meeting to talk about matters of "mutual benefit," but Sterchi officers said they were not interested. A representative of Wheat, First Securities Inc., representing Heilig-Meyers, called Sterchi last Thursday to set up a meeting, but again the officials declined. On Friday, Sterchi received a letter outlining the Heilig-Meyers offer.
Industry observers said the Heilig-Meyers move was part of a continuing 10-year trend toward consolidation in the retail furniture industry, with larger chains buying up smaller companies.
Edwin L. Underwood, vice president at Scott & Stringfellow in Richmond, said he thought the Heilig-Meyers offer was "a fair price" and that the two firms would fit well together.
The Heilig-Meyers offer was contingent on receiving 75 percent of the Sterchi stock. Sterchi, Peery said, has a "supermajority" provision in its bylaws. A "supermajority" rule attempts to thwart takeovers by requiring a corporate raider to obtain a large percentage of the stock, typically 75 to 80 percent, before control can be gained.
Peery said his firm became interested in Sterchi when Heilig-Meyers obtained an option to buy 91,100 shares of Sterchi stock, or 6.9 percent, at $31 a share from shareholder Melvin S. Cutler of Cutler Associates, Boston.