Marsh Supermarkets has turned down a takeover offer, despite the fact that it is a higher bid than its current deal to be acquired by MSH Supermarkets Holding Corp (MSH), an affiliate of Sun Capital Partners.
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Under the MSH merger agreement, holders of both classes of Marsh common stock will receive $11.125 per share in cash. But in a statement the company said that on 30 May, it received letters from Cardinal Paragon and Drawbridge Special Opportunities Advisors. In those letters, the Cardinal Group requested that Marsh consent to their making a proposal to acquire Marsh for $13.625 per share, subject to completion of due diligence, and otherwise on substantially the same terms as the MSH merger agreement.
The Company entered into a merger agreement with MSH on May 2, 2006 after having conducted a six-month public process to consider strategic alternatives, including a sale.
A statement by Marsh said Cardinal had entered into a confidentiality agreement with Marsh as part of the strategic alternative process. The confidentiality agreement contains standstill provisions under which Cardinal agreed not to make an offer to acquire Marsh without Marsh’s prior consent.
The merger agreement with MSH contains a covenant prohibiting Marsh from waiving or failing to enforce any standstill agreement without the prior consent of MSH. Marsh said it has requested MSH to consent it granting the request of Cardinal Group, but MSH and the Marsh have not been able to reach agreement on the terms under which MSH would provide its consent.
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By GlobalDataUnder the MSH merger agreement, if a competing transaction has been publicly disclosed, MSH would have the right to terminate the merger agreement and receive a US$10m termination fee from Marsh if Marsh failed to issue a press release announcing its opposition to the competing transaction within 10 business days.
A statement from Marsh said: “Given the uncertainty of the competing transaction and the adverse consequences from failing to announce opposition within the 10 business day period, the company’s board of directors concluded that there is only one prudent course of action at this time. Accordingly, the company is announcing its opposition to the Cardinal Group competing transaction. The company’s board intends to continue to monitor any developments.”
