Beatrice Companies is on the auction block. Or to put it another way, Tropicana juice, Max Factor cosmetics, Danskin hoisery, Swift's sausages, Avis Rent-A-Car, Playtex, Wesson oil, Samsonite luggage -- all are up for grabs. In what would be the largest leveraged buyout ever, Kohlberg Kravis Roberts & Co., an investment house, is offering $45 a share -- a total of about $4.9 million in cash and securities -- for the huge Chicago-based conglomerate.
That a buyout bid was coming, few doubted. Since mid-September Beatrice stock has risen more than 10 points, and more than half of the company's outstanding shares have traded hands. The speculation has been spurred by major mergers in the food industry: Philip Morris's purchase of General Foods and Procter & Gamble's purchase of Richardson-Vicks.
While the Kohlberg Kravis offer is the first for Beatrice, analysts don't expect it to be the last.
``The fat lady hasn't sung yet,'' comments Roger W. Spencer, PaineWebber's food industry analyst. ``Forty-five dollars per share, that's a lot of money. But if you look at the breakup value of this company, if you sold everything off, I come up with $55 per share.''
Among the potential bidders are Unilever NV, Dart & Kraft, Seagram, General Mills, Colgate-Palmolive, and Pfizer Inc. What makes a company such as Beatrice attractive is its well-established brand-name products. The high cost of launching and holding onto a supermarket shelf space makes it more economical simply to buy a known brand.
This isn't, yet, the case at Beatrice. Donald P. Kelly has teamed up with Kohlberg Kravis and is expected to be named chairman of Beatrice if the deal goes through. Kelly, former chairman of Esmark, quit last year when Beatrice bought Esmark for $2.7 million. Now he's back bidding for not just Esmark but all of Beatrice. Kelly is highly regarded as a manager.
In a typical LBO, a small group of investors will borrow the money to purchase a company and use the assets of the target company as collateral. The new owners then often sell pieces of the company to reduce the debt.
Already, Beatrice has a heavy $2.3 billion debt load and plans to sell its Avis, Danskin, and International Jensen subsidiaries to cut its debt. Earnings fell 26 percent in the first half of 1985 compared with the same period last year. Sales were up 16 percent. The Kohlberg Kravis LBO would increase its debt burden considerably and put further pressure on earnings.
Kohlberg Kravis has had its hand in many similar deals lately. Its most recent was the $1.9 billion buyout of Storer Communications. Others include Union Texas Petroleum, Wometco Enterprises, and City Investing. Esmark was one takeover that eluded Kohlberg Kravis.