Shamrock Sweetens Its Bid for Polaroid to $2.4 Billion

A determined Shamrock Holdings launched a hostile offer Friday for Polaroid Corp., going directly to the shareholders with a cash bid of at least $2.4 billion.

Shamrock--a Burbank-based investment firm owned by the Roy E. Disney family--is seeking to finance the takeover with funds raised in part by the investment firm Drexel Burnham Lambert, which faces a civil suit filed by Securities and Exchange Commission, charging the firm violating securities laws.

The $42-a-share offer, which may change based on several conditions, might trigger even more lucrative offers for Polaroid, according to analysts. Some have speculated that several other companies, such as Fuji Film of Japan, might make a competing offer.

“I think that opens the door for either a higher offer by Shamrock or at some point by somebody else that. . . wouldn’t mind coming in a white knight role,� said analyst Peter Enderlin at Smith Barney, Harris Upham & Co. “The market is expecting a higher offer.�

“By going to directly to the shareholders, it puts added pressure on the Polaroid,� said Regina B. Wiedenski, a securities analyst at Adams, Harkness & Hill, a Boston brokerage firm. “I think $42 is not an easy number to dismiss. The stock was trading in the low 30s before any takeover attempt.�

Polaroid officials said the instant photography company would not comment on the bid until management and the board of directors have studied the offer. The company has been the subject of takeover rumors since it won a patent-infrignement suit against Eastman Kodak, which is expected to pay at least $1 billion to settle the case.

Shamrock’s sweetened bid comes nearly a month after Polaroid rejected a previous $2.3-billion takeover offer made by Shamrock. Instead, Polaroid bolstered its anti-takeover defenses by adopting a plan intended to make an unwanted takeover prohibitively expensive.

Previously, the company had issued 9.7 million shares to a newly formed employee stock ownership fund, which would likely vote its stock in support of management. Shamrock, which already owns 4.9 million Polaroid shares, has filed suit to invalidate the fund.

Under its most recent proposal, Shamrock will pay $42 for each share of Polaroid if at least 90% of the company’s stockholders accept the offer and the employee stock fund is invalidated. If the company agrees to a merger and the plan is invalidated, Shamrock says it will boost its offer to $44 a share.

But if the employee ownership plan is upheld, Shamrock says it would reduce its offer back to $42 a share under a negotiated merger or $40 a share if Polaroid decided to fight.

And in a filing with the Securities and Exchange Commission, Shamrock said it would drop Polaroid’s plans to introduce a line of 35-millimeter conventional film products. Shamrock said it also plans to sell Polaroid’s undeveloped real estate property, cutback on the unused capacity at the company’s factories and refocus the firm’s research efforts on the Polaroid’s core businesses.

Shamrock said that Wells Fargo Bank and the Bank of Nova Scotia have committed themselves to providing $1 billion toward the takeover. Additionally, the investment firms of Wertheim Schroder & Co. and Drexel Burnham were seeking to raise $1.3 billion.

“I don’t think it will be difficult for them,� Enderlin said of efforts to finance the takeover. “I don’t think the civil charges against Drexel Burnham will hurt them. There are other would be participants to pick up the slack.�

The offer is set to expire Oct. 6, but Shamrock says it expects to extend the offer until a court rules on the validity of the stock ownership plan. A hearing is scheduled to begin Oct. 19.