Beatrice OKs Revised Bid From KKR : Each Side Gets Clause to Cancel Agreement; ‘Parachutes’ Reduced

Beatrice Cos., the consumer products company with well-known products including Tropicana Orange Juice and Avis Rent-A-Cars, said Sunday that its board of directors has approved a revised $6.2-billion takeover bid from Kohlberg Kravis Roberts & Co.

The giant Chicago-based company said it has agreed to sell to KKR for $40 a share in cash and $10 a share in a new issue of preferred stock. The acquisition of Beatrice would be the largest leveraged buy-out in history. KKR said it is “extremely confident” that it has the necessary financing in place to complete the transaction.

Beatrice originally had agreed to be acquired for $43 a share in cash and $7 in preferred stock, but KKR lowered the cash component of its offer after examining the company’s books.

Regarding the merger, Beatrice also said it has agreed to lower its special “golden parachute” payments to top executives and special bonuses to other officers. These payments were the target of shareholder lawsuits that are being settled in connection with the new KKR proposal. The company also said that, if it is presented with an alternative offer that is “economically superior” to the KKR proposal, Beatrice has the right to terminate the deal with KKR and accept the new proposal.

Shareholder Vote Planned

KKR said that, if its acquisition of Beatrice is not completed by April 30, it has the right to withdraw its offer. Beatrice said it expects to hold a shareholders meeting to vote on the KKR proposal in late March or early April.

KKR is the leading investment firm specializing in leveraged buy-outs, in which a company is acquired with mostly borrowed money and the debt is repaid through asset sales and future earnings.

The new issue of preferred stock that KKR is offering to Beatrice shareholders is designed to yield 15.25%. During the first six years, KKR has the option to pay the dividend on the preferred stock either in cash or in additional preferred shares.

KKR said it has agreed to give up a special option that it had to purchase certain Beatrice businesses in the event that someone else makes a takeover bid for Beatrice. The legality of “lock-up options,” such as the one that KKR has agreed to give up, has been questioned in recent court decisions in Delaware and New York.

KKR also said it has agreed to reduce--to 15 cents per Beatrice share from $1 per share--the “breakup fee” it will receive in the event that Beatrice is acquired by someone else.