The board of Beatrice Companies Inc. approved a slightly sweetened takeover agreement Sunday with Kohlberg, Kravis, Roberts & Co., an investment banking company, and reduced the ”golden parachutes” for senior executives by $3.4 million.
Under the new takeover agreement, Kohlberg, Kravis will pay $40 in cash and $10 in preferred stock, which sources estimated to be worth $7 a share. The annual dividend on the preferred stock would be 15 1/4 percent, payable quarterly.
”The board had nobody else playing and they had an offer they had to react to. So the board looks like they have something for the shareholders,” said Roger Spencer, an analyst with the Paine Webber Group office in Chicago.
Other sources said intensive talks between Beatrice and Kohlberg, Kravis continued for more than a week before the vote Sunday.
On Jan. 7, Beatrice said Kohlberg, Kravis had reduced the cash portion of its offer to $40 a share and increased the preferred stock portion to $10. The dividend on that preferred stock would have been 14 percent, also payable quarterly.
Sources said Kohlberg, Kravis reduced the offer after it found hundreds of millions of dollars in tax liability when examining Beatrice`s books.
The news caused Beatrice stock to tumble the next day by $4 to $43.25 in heavy trading on the New York Stock Exchange.
The golden parachute, or severance pay, agreements involving the six top Beatrice officials were reduced to less than $20 million from nearly $23 million, according to the joint announcement by Beatrice and Kohlberg, Kravis after a board meeting at Beatrice`s headquarters, 2 N. LaSalle St.
The reduction followed intensive negotiations with the plaintiffs in two sets of consolidated shareholder suits filed after the Kohlberg, Kravis deal. One set of suits was filed in Illinois, where Beatrice is based, and the other set in Delaware, where the company is incorporated.
Most of the suits challenged the estimated $75 million in golden parachutes Beatrice is providing for 60 top executives, including the top six officials.
When Beatrice announced a definitive merger agreement with Kohlberg, Kravis on Nov. 14, the Chicago-based food and consumer products giant said the offer was worth $43 a share in cash and $7 a share in a new class of preferred stock of the company organized to acquire Beatrice.
The company said Sunday that the deal is expected to be closed by the end of April. If approved by stockholders, the $6.1 billion acquisition would be the biggest leveraged buyout ever. In a leveraged buyout, the debt incurred to take over a company usually is repaid with funds from operating income or the sale of assets.
The vote Sunday came after the board had postponed without explanation its scheduled meeting last Tuesday. A source close to the negotiations said one reason for the delay was that the board had been trying to reach settlements before voting on the modified proposal.
