Interco

EVALUATION OF INTERCO

Interco is a diversified company with a focus on manufacturing. Currently, they are in a re-positioning phase in their companies’ history; in which they are trying to focus on some of the company’s core competitive advantages. A step of this process includes divesting itself of the non-core/unprofitable portions of the company. Currently, it has a strong presence in the furniture and footwear industries. Especially in the last 4 years, it has made significant movement toward a focus on footwear and furniture.

Recently, there has been significant concern that Interco was a solid acquisition target; as they had become over-leveraged and under-priced. The under priced stock was caused by the lesser performing pieces of the company. It was known that the company was much more valuable then the stock stated; but that until the company had cleared these underperforming assets, the price would remain. City Capital was one of these investment companies aware of the situation and interested in getting a great deal.

OFFERS ON THE TABLE

The Rales’ Brothers made an offer in July 1988 at $64 per share for all of the remaining shares that Interco had in their possession. In the offer; they made it clear that they would consider raising the price of this offer. This was very concerning to the board and company leadership; as they knew they were not interested in selling; meaning this could be leading to the possibility of a hostile takeover. To protest against this; the board began the creation and implementation of a ‘poison pill’ type arrangement that would make it very discouraging for a company to implement a hostile takeover. We will discuss more about this later, however the arrangement was approved August 8th, 1988; at Interco’s annual meeting. Their annual board meeting turned its focus elsewhere when they received an offer of $70/share the same day; again from City Capital and again with the communication that they would be willing to...