Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, July 29, 1994 TAG: 9407290064
SECTION: BUSINESS PAGE: A9 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
The purchase, which is being paid partly with a new stock issue, could complicate Tyson Farms Inc.'s hostile attempt to take over WLR.
Under the agreement announced Thursday, Cuddy will own 9 to 10.5 percent of WLR's outstanding stock, depending on the stock price at the close of the deal. But under the terms of the deal, Cuddy's WLR stock will be voted for four years at the recommendation of WLR's board of directors, provided there is no change of control of the company in the meantime.
Tyson is expected to release today the results of its latest tender offer to buy outstanding shares of WLR. Tyson has offered $330 million, or $30 for each WLR share. It is the same price that WLR shareholders rejected in May. Tyson, of Springdale, Ark., also recently announced it will try to elect its own slate of directors to the WLR board.
Thursday's announcement "is another interesting chapter" in the WLR-Tyson story, said George Shipp, a stock analyst with Scott & Stringfellow Inc. in Richmond. Shipp wouldn't say that WLR's purchase of Cuddy would make Tyson's takeover attempt tougher, but he said Wall Street reacted negatively to the news. WLR's stock closed Thursday at $25.50 a share, down $1.75 from Wednesday.
The deal makes sense for WLR regardless of Tyson's moves on the company, Shipp said. The purchase of Cuddy increases WLR's sales and earnings. "The underlying value of WLR just went up," he said.
Tyson will now have to approach the WLR takeover differently, Shipp said.
Reed Hudson, a Tyson attorney, said the company would have no immediate reaction to WLR's announcement.
But Hudson questioned whether the Cuddy deal will pass antitrust scrutiny.
"They still have to go through all that with the [Federal Trade Commission]," he said.
The closing of the WLR-Cuddy deal is expected within 30 days, said Gail Price, a WLR spokeswoman. The addition of Cuddy's 1,800 employees will bring total employment at WLR Foods to just under 9,000.
Cuddy Farms is a subsidiary of Cuddy International, a private family-owned corporation based in London, Ontario. Its turkey business is based in Marshville, N.C. The company also has plants in Charlotte and Monroe, N.C.
The terms of the purchase agreement call for WLR to pay Cuddy $43 million in cash and to issue common stock for the balance. Peter Green, chief executive of Cuddy International, will be added to WLR's board of directors at the closing of the acquisition.
James Keeler, president and chief executive officer of WLR, said the company had been talking to Cuddy for years about buying its turkey business. The purchase will raise WLR's share of U.S. turkey sales to 11 percent. The company expects with the addition of Cuddy's operations to reach the $1 billion sales level in 1995, Keeler said.
WLR has annual revenues of $720 million, selling turkey and chicken products under the Wampler-Longacre label and retail ice under the Cassco label. The Cassco Ice & Cold Storage unit has operations in Roanoke.
WLR exports to more than 40 countries and has operations in Virginia, West Virginia and Pennsylvania.
The addition of Cuddy will help WLR increase its processed turkey product line, Price said. Such packaged products have a longer shelf life than whole-bird products. Cuddy raises 11 million birds annually for further processing.
by CNB