Kemper turns down GE offer

March 18, 1994|By New York Times News Service

CHICAGO -- The board of Kemper Corp. formally rejected General Electric Co.'s $2.2 billion takeover bid yesterday, as expected. But analysts said the rebuff was just a prelude to further negotiations, a higher offer and an eventual deal -- if not with GE, then with another buyer.

Kemper's rejection of the unsolicited $55-a-share offer was conveyed in a blunt letter faxed from David B. Mathis, Kemper's chairman and chief executive, to John F. Welch Jr., his counterpart at GE.

Mr. Mathis stressed Kemper's desire to remain an independent stock brokerage, life insurance and asset management company and accused GE of trying to steal Kemper with a "low-ball proposal."

He concluded, "I would hope now that you would attend to your own business and its independent interests, and allow us the same courtesy." GE said it would respond at a time of its choosing.

Kemper, which is based just west of here in Long Grove, Ill., simultaneously released a statement from the 13-member board that laid out how it hoped to convince its shareholders, especially the institutions that hold about 70 percent of its stock, that the unanimous and flat rejection of GE's approach was in the investors' interest.

It cited the company's restructuring last year to leave cyclical sectors of the insurance business, steps to improve retained operations and last year's sharply improved financial performance. But Wall Street analysts were still predicting an eventual merger, contending that a takeover would make sense for both companies.

"The institutions will view an unconditional rejection as unacceptable," said Eric N. Berg, who follows the financial services industry for Bear, Stearns & Co.

Kemper has already been the subject of five shareholder lawsuits for its handling to date of the offer. If GE were to withdraw its offer, Kemper's stock would almost certainly tumble, and that presumably would lead to more litigation.

Yesterday's announcement came after trading ended on the New York Stock Exchange.

Kemper's shares rose $1, to $60.75, on the lowest volume since GE made its offer public Monday.

Kemper's shares hit a 52-week high of $62.125 on Tuesday before falling back on profit-taking and disappointment that the company had not responded more positively to GE's offer to negotiate further on price.

GE Capital, General Electric's hugely profitable financial subsidiary, sees Kemper as a way to increase its small base in the management of financial assets.

Kemper manages $70 billion in investors' funds, nearly 10 times as much as GE Capital, including $48 billion in the fast-growing mutual funds business.

Kemper's other main businesses are the troubled retail securities unit, which the company formed by acquiring regional brokerages in the 1980s, and two life insurance companies.

GE suggested in a letter dated March 2 confirming its $55-a-share offer that it might be prepared to raise its bid after being allowed a closer look at Kemper's $1.7 billion real estate portfolio.

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