Kemper seeks bids, but not just from GE

May 09, 1994|By New York Times News Service

Faced with a $190 million increase in a hostile takeover bid from General Electric Co. and the likelihood of losing a key proxy fight, Kemper Corp. yesterday formally put itself up for sale.

The action, which Kemper's management and board had resisted for months, opened the door for a bidding war involving GE and other potential suitors for the insurance and investment company, which is based in the Chicago suburb of Long Grove, Ill.

Kemper's board acted after GE Capital, the financing subsidiary of General Electric, raised its offer on Friday to $60 a share from $55. The increase pushed the price to nearly $2.4 billion from $2.2 billion.

"We are definitely in play," David Mathis, the chairman and chief executive of Kemper, said in an interview yesterday. "Our board has made a decision to conduct an orderly sales process. It is hard to predict what the future will bring, but I would expect the company will be sold."

Mr. Mathis and Wall Street analysts said other companies had expressed an interest in acquiring Kemper or portions of its business, but General Electric clearly anticipates winning the battle for the company.

"We expect to now do a full due diligence and close this transaction at $60 a share," Anthony Zehnder, a spokesman for GE Capital, said.

However, the decision by the Kemper board raises the possibility of a number of different scenarios, Wall Street investment bankers said.

They said Travelers Inc., another financial services giant, and other big financial services companies had expressed interest in acquiring Kemper since GE began its unsolicited attempt early this year.

In addition, companies have proposed buying portions of Kemper, including its mutual fund business or its life insurance lines.

"It is possible that the best price for shareholders will come from breaking up the company and selling its pieces," said one investment banker, who insisted on anonymity. "That creates a larger group of competing buyers."

Mr. Mathis said Kemper had refused to talk with potential bidders since GE's offer but would now explore options with a number of interested companies. He agreed that the company could be sold as a whole or in parts.

"We aren't giving GE any advantage nor are we giving them any disadvantage," said Mr. Mathis, who added that he had no idea whether he will remain with Kemper if it is sold.

GE Capital, which is highly profitable, sees Kemper as a means )) of increasing its small base in the management of financial assets. Kemper handles $70 billion in investors' funds, nearly 10 times as much as GE Capital.

Kemper's other main businesses are a beleageured retail securities unit and two life insurance companies.

GE's securities business, Kidder, Peabody & Co., suffered its own problems last month with a disclosure of accusations that a top bond trader had created $350 million in phony profits. Analysts said, however, that GE is so large that the Kidder troubles would have no lasting effect on its overall financial picture.

Kemper also has a $1.7 billion real-estate portfolio, which poses a question mark for prospective acquirers. About one-third of the real estate is in California, where the market remains troubled.

Kemper took a $222 million write-down on its real-estate holdings in 1992 and a $185 million write-down last September. The company's executives have told Wall Street analysts that no further write-downs are anticipated this year. Yesterday's action allows GE and other bidders to examine Kemper's real estate assets along with its other businesses.

A CHRONOLOGY

Key moments in General Electric Co.'s bid to purchase Kemper Corp.

Jan. 26: General Electric Co.'s GE Capital Corp. privately proposes a $55 a share, or $2.2 billion, offer to buy Kemper Corp.

March 4: In a letter, Kemper's management rejects GE's offer but agrees to bring it before its board of directors.

March 14: GE publicly discloses its offer for Kemper.

March 17: Kemper's board rejects the GE offer.

March 20: GE announces plans to take its bid directly to shareholders and asks Kemper for a list of its stockholders.

March 22: Kemper agrees to provide GE with the shareholders list.

March 24: GE says it will nominate four people to Kemper's board at its May 11 annual shareholders meeting.

March 28: Kemper urges its shareholders to reject GE's offer.

April 4: GE says in a letter to Kemper shareholders that Kemper has "stonewalled" its bid.

April 10: Kemper mails letters to shareholders again urging them to reject GE's offer.

May 3: Kemper says it is worth $65 a share and asks shareholders for a year to bring its stock up to that level.

May 8: GE increases its bid to $60 a share. Kemper says it will consider the new offer. Both companies agree to postpone vote on board nominees until Aug. 22.

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