NEW YORK--Dickstein Partners said Monday it was willing to raise its bid to acquire Hills Stores Co., a move analysts view as essential for the investment firm to take over the discounter unless Dickstein places its slate of directors on Hills' board.
A source close to the investment firm said Tuesday that Dickstein was unlikely to improve its bid before Hills' June 23 annual meeting, due to its effort to elect its own slate of directors. The directors are pledged to conduct a takeover auction.
Hills management last week rejected a $27-per-share merger proposal by the New York firm. The offer consists of $22 in cash and $5 in a new 14 percent holding company debenture, payable in kind for up to five years and maturing in 12 years.
Dickstein initially bid $25 per share in cash on May 3.
David Brail, a vice president at Dickstein Partners, said, "If Hills doesn't negotiate with us prior to its annual meeting, we throw their board out and put the company up for auction. We're committed to a purchase or an auction."
Brail said he could not comment on when his company would raise its bid or by how much. "We haven't gained access to the books, so it's difficult to know what the values might be," he added.
If Dickstein fails to place its nominees on the board, analysts believe it will take a cash offer in the high $20s to win the favor of shareholders in the chain, which is based in Canton, Mass.
"It's not clear that the $27 bid is a better offer," said a source close to Hills, which operates 154 stores in 11 Midwestern and mid-Atlantic states. "Many people think it's less attractive. There's certainly a question as to the value of the bond."
Hills stock closed Tuesday at 23 3/8, unchanged, on the New York Stock Exchange.
--Fairchild News Service

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