Beatrice Board Rejects Buy-Out Offer by KKR

Beatrice Cos. said late Sunday that its board of directors unanimously rejected an offer from Kohlberg Kravis Roberts to buy the Chicago-based food company for $45 a share.

Beatrice directors, who held a special board meeting in Chicago on Sunday, also said the best way to achieve full value for shareholders was not through “a leveraged buy-out or any type of buy-out at this time.”

A spokesman for KKR said the New York-based investment firm had no comment. It had made a buy-out offer last week of $4.9 billion, or $40 in cash and $5 of preferred stock for each of Beatrice’s 109 million shares outstanding.

KKR is a specialist in leveraged buy-outs, in which a small group of investors acquires a company by borrowing against the target firm’s assets.

Despite Beatrice’s contention that the company is better off by remaining independent, its management will be under pressure to maintain shareholder value.

Beatrice’s stock price has climbed more than 50% from $30 a share since July amid rumors that it was the target of a takeover.

On Friday, Beatrice closed unchanged on the New York Stock Exchange at $46.125 on a volume of 3.3 million shares, which made it the second most active issue.

Beatrice said in a statement that its board of directors had concluded that the KKR offer was “inadequate and not in the best interest of shareholders,” based on advice from the company’s investment bankers, Salomon Bros. and Lazard Freres.

The statement also said that “no leveraged buy-out explorations were authorized and none is presently contemplated.”

It was Beatrice’s first reference to unconfirmed reports on Friday that several of the company’s executives, led by Executive Vice Presidents David E. Lipson and Richard J. Pigott, had hired Goldman, Sachs to explore an alternative buy-out plan.

A Beatrice spokeswoman would not say whether the board had, in fact, considered a buy-out by management.

Wall Street sources said Goldman, Sachs had made preliminary inquiries to KKR on Friday.