Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Can Mario Gabelli convince a judge to rule that the stock of New York-based Carter-Wallace Inc. is worth more than the would-be buyers have agreed to pay? Or can he at least scare the sellers into believing he has a chance in a Delaware court, thus forcing them to pay him more for his shares, or cancel the deal? Without the votes to block the proposed sale of the company, the CEO of Gabelli Asset Management Inc., based in Rye, N.Y., is threatening to go to court. Gabelli — whose funds own about 22 percent of the total shares and 27.2 percent of the common shares — said in an interview that he will exercise dissenter’s rights, contesting the fairness of the $1.15 billion sale of the company in two halves, which is up for final shareholder approval on Sept. 20. With the controlling Hoyt family supporting the deal and insiders controlling 83 percent of the voting shares, Gabelli cannot actually block the deal. The sale could close despite a court action. But the majority shareholders would be left with a potential liability for any underpayment Gabelli proves in court. Gabelli’s aim is to convince 30 percent of the shareholders to vote against the deal. If they do, the family shareholders can walk away from the agreements without penalty, Gabelli said, though he admits that it will be hard to get the 30 percent. The dissenter’s rights procedure requires Gabelli to prove his shares have a claim that is worth more than the offer price. “Our clients will hopefully get more in the courts if they cannot get more in the marketplace,” Gabelli said. The rights are rarely exercised, and successful challenges are even rarer. Moreover, the odds against Gabelli lengthened Thursday when Institutional Shareholder Services came out in favor of the offer. ISS said it talked with Gabelli, but concluded it was best to sell out. The offer “is the result of a lengthy auction process [conducted by J.P. Morgan] which we believe is a better indication of the company’s value than any calculation of its present value that is reliant on future projections.” Gabelli said he’s confident about a potential suit. Of 400 companies his funds have held that have been sold, he has only claimed dissenter’s rights three or four times, and he says he has won two of those cases. In May, Church & Dwight Co., the Princeton, N.J.-based maker of Arm & Hammer products, teamed with Kelso & Co., a New York-based private equity firm, to buy Carter-Wallace’s consumer brands for $739 million, including debt. Two more buyout firms, Cypress Group of New York and The Carlyle Group of Washington, D.C., have agreed to jointly buy Carter-Wallace’s pharmaceutical division for $408 million. After taxes, the sales should net $919 million, or $20.30 per share. Carter-Wallace shares closed up one cent Thursday at $20.21. The deals represent a 15 percent premium to its April 4 price, before speculation began about a sale. Gabelli claims management did not explore alternatives to a sale, including staying public because management will receive $115 million in severance and change-of-control agreements. He claims the company’s share price would rise to the high 20s or low 30s range in 18 months if it initiated a share buy-back program. He cites the company’s forecasts that Ebitda will rise 12 percent in fiscal year 2002. He also claims the share prices have been depressed because management has refused for years to cooperate with analysts. Gabelli also questions the insider shareholders’ motives. “The smell test is the family wanted out. They were burned out. The management had a platinum-plus parachute, and the investment banker got a fee and said, ‘Let’s move on,’” he said. Spokeswomen for Carter-Wallace and J.P. Morgan declined comment. But in public filings, the company has defended the sale, citing fairness opinions by J.P. Morgan and Houlihan Lokey Howard & Zukin. It argues that it would have a difficult time expanding through acquisitions “given [its] relative size and resources,” and that staying public is not a good option because its shares are thinly traded. Copyright (c)2001 TDD, LLC. All rights reserved.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.