Imagine you’re sitting at your office desk when a co-worker sidles up to you and whispers, “I just read on Bloomberg that another company is offering to buy us for 10 bucks a share.”
Naturally, the first thought that pops into your head is “I hope I don’t lose my job.” But since you’ve been good enough and stayed long enough to have earned stock options at $2 per share, some quick math makes you think, “Well, maybe this won’t be all that bad.”
Then another co-worker tells you that management might reject the offer, hoping the company will up the ante. The potential acquirer might call your bluff and withdraw its bid — you still have your job, but maybe not your windfall.
While it’s not the most common of things, that’s what three companies, their employees and other shareholders found themselves dealing with during the second quarter of 2012 — and each worked out a little differently.
Here’s a look at the companies, and how much was potentially left on the table when the deals failed to close:
First up is Avon (NYSE:AVP) which received not one, but two buyout offers by privately held Coty.
Let’s get this out on the table right now: Avon is and was a mess. In an effort to remake the name and the brand, the struggling cosmetics maker hired Sheri McCoy in late 2011 from Johnson & Johnson (NYSE:JNJ) to turn things around. Along came Coty with a right-out-of-the box offer of $23.50 per share in April — a nice premium over its then-range around $19 — but even after a miserable first-quarter earnings report, Coty was rejected by Avon management. But Coty didn’t balk, and instead upped the offer price 15% to $24.75 per share, good for a $10.7 billion price tag.
The catch? A weekend to decide.
Avon never did respond, the clock ran out, and Coty withdrew the offer. Today’s AVP price? $15.50 per share. Thanks for nothing.
Next on the docket is Pep Boys (NYSE:PBY), the venerable Philadelphia car parts supplier.
Pep Boys is in a tough market, with competition from big boys AutoZone (NYSE:AZO), Advance Auto Parts (NYSE:AAP) and O’Reilly Automotive (NASDAQ:ORLY).
PBY’s revenue growth and earnings for the past few years have been … well, blah … and the stock price has lagged both the market and the competition.
Enter private equity company Gores Group, led by founder and CEO Alec Gores. Gores worked with Pep Boys management to acquire all the outstanding shares of the company at $15 per share, valuing the company at approximately $1 billion. The transaction was announced in January, and scheduled to close in the second quarter of 2012.
Oops. Nevermind. Gores Group decided to walk away from the merger in late May amid worries about PBY’s dwindling business. Pep Boys did get a nice booby prize of $50 million as settlement for any and all potential claims under the terms of the merger agreement, though.
The $50 million will make at least a dent in the company’s nearly $300 million long-term debt load and help with struggling cash flow. In the meantime, however, stockholders will forgo some profit, as the stock trades under $10 per share.
Human Genome Sciences
Looking a little bit closer for those of us at InvestorPlace’s Rockville, Md., home, Human Genome Sciences‘ (NASDAQ:HGSI) gleaming offices were the site of an unsolicited offer from GlaxoSmithKline (NYSE:GSK) for $13 per share, or $2.6 billion.
You could practically feel the anxiety in the local restaurants packed with HGSI workers out for lunch as the company mulled the offer, particularly since the $13 offer price represented a nearly 50% premium to the share price. GSK has made efforts to woo shareholders with little success, as to date no more than 475,000 shares have been tendered under the offer (makes you wonder who those shares belong to), so clearly enthusiasm is lacking for the deal.
What’s interesting is that GSK has not raised its price one nickel, thinking its offer a fair one. Clearly, HGSI board members, management and the other owners of the remaining 1.6 million non-tendered shares are thinking otherwise. HGSI management has extended a mid-June deadline to a definitive July 16 date to give folks more time to contemplate the offer and, more importantly, give GSK another chance to sweeten the pot.
Beyond the share price offering, GSK has said it is trying to replace all 12 directors on HGSI’s board. Perhaps that’s why no new share price offer is on the table.
The stalling tactics on both sides don’t appear to be moving the needle in any direction, as the stock has bounced in and around the offering price.
For now, let’s call this one a draw.
Marc Bastow is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.