Sports Business

CHRIS KATTERJOHN Commentary: Guidant scenario recalls '80s-almost

December 12, 2005

Last week, I was itching for a fight.

When Boston Scientific surprised all but the deepest of insiders with its bid for Guidant, I was suddenly transported back to the 1980s, an era of hostile takeovers so intense it spawned books and movies. Some called it "The Decade of Greed."

Every day there was news of a new hostile takeover or a bidding war or a leveraged buyout of epic proportions. And there were names and personalities to match. Remember T. Boone Pickens? Kolberg Kravis & Roberts? Ivan Boesky? Michael Milken? Gordon Gecko? This was the era that gave birth to terms like junk bonds, poison pills and golden parachutes. These were exciting times for business journalists, including me.

I cut my teeth as a business writer in the '80s, and I wrote about most of the deals that happened in Indianapolis during that period. As a result, when Boston Scientific popped out of nowhere, I found myself wishing for a battle royale. We haven't had a good one around here for a long time.

Sick? Maybe, but Guidant is already gone, right? We might as well make this interesting.

At IBJ press time, J&J was playing it cool and keeping its cards close to the vest. Guidant was seriously considering the Boston Scientific offer. What will happen next is anyone's guess.

As I reflected on the '80s, I realized that the local deal that fascinated me the most was Quaker Oats Co.'s acquisition of Stokely-Van Camp Inc. The outcome was the culmination of a corporate drama that began in September 1982 and ended 11 months later with the Quaker purchase.

I must've written a dozen stories along the way. The saga had a little bit of everything.

At the start, Stokely shares were trading for about $35. Young Bill Stokely-in his early 40s at the time-announced a management-led LBO at $50, and then upped it to $55 after shareholders sued. Soon after, Chicago-based Esmark started sniffing around and eventually ended up joining the management group in the LBO.

Within weeks, Veteran Esmark CEO Don Kelly pulled his company from the deal when young Bill demanded that Esmark agree to neither increase nor sell its position in Stokely-Van Camp after the deal was completed.

Out of nowhere, Pillsbury Co. entered the fray with a friendly $62 offer. When young Bill said, "no thank you," Pillsbury CEO Bill Spoor wasn't happy and went after Stokely-Van Camp anyway. To steal a book title from that era, what ensued was a "not-so-tender offer."

That stopped everything and prompted Stokely to hire an investment banker to sell the company in a closed-bid, one-shot-only auction, may the best man win.

The best man turned out to be Quaker Oats, which agreed to pay $77 a share for Stokely-Van Camp, which owned the highly profitable and highly coveted Gatorade brand. In fact, the sports drink was the prime reason everybody was interested.

When the smoke cleared, Bill Stokely looked pretty good. Yes, he was unable to pull off his own leveraged buyout, but he outfoxed a couple of veteran CEOs in Kelly and Spoor, and he ended up getting great value for his shareholders.

The Wall Street investors who thought Pillsbury would prevail and sold their shares at $62-and there were many-ultimately left $15 on the table, and Stokely-Van Camp shareholders who suffered through the whole process were rewarded by more than doubling their investment in less than a year.

Of course, we'd all much prefer that local companies remain independent and flourish so our community derives the many benefits that result. But when the die is cast-as it is in the Guidant situation-you can't begrudge a guy for wanting a little entertainment.



Katterjohn is publisher of IBJ. To comment on this column, go to IBJ Forum at www.ibj.comor send e-mail to ckatterjohn@ibj.com.
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