Pillsbury Co. moved quickly with lawsuits in 13 states to fight a British company's surprise $5.17 billion buyout bid of the United States' fourth-largest food company.
Grand Metropolitan PLC said in a filing with the Securities and Exchange Commission that if it succeeded in its $60-a-share bid begun late Monday, it would sell Pillsbury's struggling Steak & Ale and Bennigan's restaurants.Grand Metropolitan, one of the world's largest liquor producers, indicated it would sell the two chains because of laws in some states prohibiting a company from owning both alcoholic beverage makers and retailers.
Pillsbury is using that issue to challenge the takeover, although by Tuesday it had not publicly rejected or approved the offer.
In a statement late Tuesday, Pillsbury Chairman Philip L. Smith said Pillsbury had sued to block the acquisition in 13 states, contending a buyout by Grand Met would violate the state liquor laws.
In response, courts in Texas, Oklahoma, New Mexico, Michigan, Kansas, Pennsylvania and Missouri issued temporary restraining orders enjoining Grand Met from acquiring Pillsbury stock, and a Delaware court has rejected Grand Met's effort to stop those actions, Pillsbury said. Pillsbury is incorporated in Delaware. The statement by Pillsbury did not identify the other states.
Grand Met, with annual sales of $10 billion, makes Smirnoff Vodka, J&B Scotch, Gilbey's Gin, Watney and Ushers ale, and Almaden wines. The London-based company also owns hotels, the Alpo pet food company, Pearle vision centers, and a chain of betting offices in England and Ireland.
Pillsbury said its board of directors would review the offer "at an appropriate time."
Smith said at the Pillsbury shareholders' meeting in September that one of his chief goals was keeping the company independent. But on Tuesday, industry analysts doubted Pillsbury could defend itself against the takeover attempt and remain independent because the bid placed a higher value on the company than most analysts think its worth.
Pillsbury stock soared by $18.50 a share Tuesday to $57.50 on the New York Stock Exchange, the first trading session after Grand Met made its offer.
"I think they'll fight it initially - attempt to fight it - but I think it's a losing battle," said John M. McMillen, an analyst for Prudential-Bache Securities Inc. in New York.
Ian A. Martin, Grand Metropolitan's chief executive for U.S. operations, said Tuesday in Minneapolis he is "very interested in doing this thing in a gentlemanly manner."
Pillsbury's troubled restaurant division, which includes the Burger King fast-food chain, provides about half of Pillsbury's $6.2 billion in annual sales. Martin said Grand Metropolitan would keep Burger King but would sell Distron Distribution, Pillsbury's in-house distribution system for Burger King.
The full-service restaurant division - Bennigan's and Steak & Ale - was restructured in January, resulting in a $91 million charge that has dragged down earnings. The restructuring also precipitated management changes, including the hiring of Smith, formerly General Foods Corp.'s chairman, in July.