A private San Francisco investment fund plans to launch a $27.3 million cash tender offer July 8 to acquire financially beleaguered Kerr Group Inc.
Officials of Fremont Partners and Kerr have signed a definitive merger agreement that promises to end an era of uncertainty for Kerr and bring new life to the manufacturer of plastic packaging products. The transaction could close in the latter half of August.
``We got a solid partner,'' D. Gordon Strickland, Kerr president and chief executive officer, said in a telephone interview from his office in Lancaster, Pa. ``We clearly were highly leveraged and had limited financial resources.''
Kerr directors approved the deal June 30.
Fund principal Gregory P. Spivy said Fremont Partners has links with members of San Francisco's well-known Bechtel family.
The fund agreed to pay $5.40 per share for each of Kerr's 3,933,095 outstanding shares of common stock and $12.50 per share for each of Kerr's 487,400 outstanding shares of class B cumulative convertible preferred stock.
The cash tender offer to acquire all Kerr shares is subject to Fremont receiving at least 51 percent of the fully diluted shares of common stock.
Once the deal is concluded, the new ownership will ``put Kerr on sound financial footings and provide resources'' to continue serving its ``blue chip list of customers,'' Strickland predicted.
Kerr lost $1.1 million on sales of $28.7 million for the quarter ended March 31 and recorded a loss of $22.3 million on 1996 sales of $107.4 million.
Kerr employed 875 as of Dec. 31 in operations that make and sell plastic packaging products including child-resistant and tamper-evident closures, prescription packaging products, jars and other closures and containers. Until 1992, the company was known as Kerr Glass Manufacturing Corp.
Kerr has facilities in Jackson, Tenn.; Ahoskie, N.C.; and Bowling Green, Ky., in addition to its large Lancaster site. The facilities operated at about 72 percent of capacity last year.
Affiliates of two New York-based investor groups are Kerr's largest owners. Gabelli Funds Inc. held 15.4 percent of Kerr's outstanding shares as of March 8, and the Wynnefield Partners fund owned 10 percent as of Feb. 25.
``We're happy the process reached a logical conclusion, finding someone who could take care of shareholders' interest,'' said Nelson Obus, general partner of Wynnefield Partners Small Cap Value LP and president of Wynnefield Capital Inc., which manages an offshore fund.
Obus was surprised to see a financial buyer seek Kerr, and noted that a strategic buyer would need to pay $2 million to $3 million to overcome protections for Fremont Partners in the definitive agreement. It is ``good to have a competitor with Owens-Illinois,'' Obus said.
Toledo, Ohio-based Owens-Illinois Inc. manufactures plastic containers, closures and prescription containers and is the largest U.S. maker of glass containers.
Obus credited a ``high level of confidence'' in Kerr Chairman Herbert Elish with making the deal palatable to shareholders. Elish was named a director and chairman of Kerr's board in June 1996.
He ``can't be compromised,'' said Obus, who was familiar with Elish's record as chairman and CEO of Weirton Steel Corp. in Weirton, W.Va., through 1995. ``They could not trifle with him.''
In October 1995, Kerr retained New York-based investment banker Lehman Bros. Inc. for advice on refinancing or selling the company.
In March 1996, Kerr sold its consumer products business to Alltrista Corp. for $14.5 million and promoted Strickland to replace Roger W. Norian as CEO. Obus criticized Kerr directors on the size of Norian's separation package.
Fremont Partners was established as a private equity fund in September under the sponsorship of Fremont Group and raised $600 million from institutions including corporate public pension plans, Spivy said.
Members of the Bechtel family own a majority of Fremont Group and, separately, a major stake in engineering-construction powerhouse Bechtel Group Inc., also based in San Francisco.
Fremont Partners does not hold any packaging companies in its portfolio but has ``done a significant amount of due diligence'' on Kerr's business, Strickland said.
Kerr ranked 47th in Plastics News' April survey of North American injection molders, with related sales of $96 million. It also ranked 50th in last year's survey of North American blow molders.
