Allied Stores Corp. of New York yesterday made an unexpected and unwelcome bid to buy the Washington corporation of Garfinckel, Brooks Brothers, Miller & Rhoads Inc. for $210 million.
Allied already has signed a deal to buy out Garfinckel's biggest stockholder and is willing to pay $48 a share for the rest of the stock, the New York firm disclosed. Allied simultaneously filed a lawsuit in Richmond to try to prevent enforcement of a Virginia law that blocks hostile takeovers of Virginia companies.
Stunned Garfinckel Chairman David Waters accused Allied of "absolute treachery," called an emergency board of directors meeting and managed to delay a decision in the Richmond case until Wednesday.
The price of Garfinckel's stock jumped more than $14 a share from $341/8 to $483/8 and was the the biggest gainer of the day on the New York Stock Exchange.
Strongly hinting that Garfinckel's will go to court to try to protect its independence, Waters said he called Allied President Thomas Macioce as soon as he learned of the bid.
"I said I thought he was lying, deceitful and treacherous and violated the standards by which decent people do business," said the enraged Waters.
"Waters' reaction was entirely negative," Allied said in a statement issued later in the day. Allied is a $2.3 billion-a-year department store empire. The best known of its 22 department stores -- none of which is considered trend-setting -- are Bonwit Teller of New York, Jordan Marsh in Boston and Joske's of Texas.
Waters complained that Allied made the offer after obtaining inside information during negotiations to buy the Miller & Rhoads department store chain from Garfinckel's.
Garfinckel's has been trying to sell Miller & Rhoads because the Richmond-based chain is at best barely profitable and Garfinckel's wants the cash it could get by selling the weakest link in its chain.
Ironically, Garfinckel's was counting on using the cash from the Miller & Rhoads sale to protect itself from an unfriendly takeover attempt just like the one made yesterday. The money could have been used to buy back the 21 percent of Garfinckel's stock that is owned by Wickes Corp., a San Diego lumber and retailing conglomerate.
Allied disclosed yesterday that it has signed an agreement to buy the Wickes shares at $45 subject to certain conditions. Wickes became Garfinckel's biggest stockholder when it acquired Gamble-Skogmo Inc. of Minneapolis last year. Gambles bought the stock in 1978 from the family of Joseph R. Harris of Washington.
The Harris family, in turn, got the stock when Garfinckel's bought its local chain of women's clothing stores. When the Joseph R. Harris stores went sour, Garfinckel's closed them down. Soon after, the Harris family pulled its representative off Garfinckel's board of directors and sold out, throwing control of Garfinckel's up for grabs.
Garfinckel's had to file a complex and costly lawsuit to prevent being taken over by Gamble-Skogmo and last year filed another lawsuit -- still pending in New York -- aimed at preventing Wickes from selling its stock or buying more.
Waters said Garfinckel's has been talking to Allied about Miller & Rhodes for several weeks. Garfinckel's board met Thursday, with no inkling that Allied was about to make a bid for the company.
Waters said his company's official response to the offer will have to wait until the board can be convened. In the past, the Garfinckel directors have repeatedly stated that they prefer to remain an independent company rather than sell out to a bigger firm.
Garfinckel Corp. is one of the most successful specialty retailers in the country. Besides the Garfinckel stores in the Washington area, its opertions include the rapidly growing but fashionably stable Brooks Brothers stores in the U.S. and Japan, the trendy Ann Taylor women's stores and Catherine's Stout Shoppes whose profits are reported to be as hefty as the customers it serves.
Allied Stores began its bid to buy Garfinckel's yesterday morning by filing a formal tender offer with the Securities and Exchange Commission and delivering a copy to Garfinckel's.
At the same time, Allied filed a lawsuit in U.S. District Court in Richmond against Garfinckel's and the Virginia State Corporation Commission challenging the state's "corporate takeover law" which is designed to protect Virginia companies from unfriendly buyers.
An Allied subsidiary, ASC Stores Inc., asked for a temporary restraining order forbidding the state from enforcing the law. Judge Robert H. Merhige refused to grant the injunction, but scheduled a hearing for Wednesday.