KKR Makes $3.3-Billion Bid to Buy Out Owens-Illinois

TOLEDO, Ohio â€”  Owens-Illinois Inc. said Thursday it received a buyout proposal valued at $3.34 billion from the investment firm of Kohlberg Kravis Roberts & Co.

Owens-Illinois said a panel of its outside directors would consider Kohlberg Kravis’ request to negotiate the proposal, which appeared to be friendly.

Kohlberg Kravis, which earlier this year led an investor group that acquired Beatrice Cos. for $6.2 billion, proposed to exchange cash and securities valued at $55 for each of Owens-Illinois’ about 60.8 million common shares outstanding.

The offer would include $48.50 a share in cash and a junior security expected to have a current market value of $6.50, Owens-Illinois said.

After the announcement, Owens-Illinois’ common stock jumped 6 3/4 to 51 on the New York Stock Exchange. The stock was the Big Board’s most-active issue, with more than 3.6 million shares changing hands.

Headquartered in Toledo, Owens-Illinois is a diversified manufacturer that produces containers and other packaging goods made of glass, plastic and paper and other wood products. The company also has interests in health care and financial services.

Kohlberg Kravis is a privately held investment firm, based in New York, that specializes in leveraged buyouts.

In a leveraged buyout, a company is taken private through an acquisition that is financed largely with borrowed funds, and the debt is repaid with money from the target company’s cash flow or from the sale of assets.

Kohlberg Kravis’ proposals usually are friendly, and in many cases it allows the target company’s executives to become equity investors in the new companies it forms to make the acquisitions.

Such an offer was made to Owens-Illinois’ management and Kohlberg Kravis also plans to have Owens-Illinois continue as an independent company under its current management, Owens-Illinois said.

Some securities analysts termed Kohlberg Kravis’ offer a fair one, and said there was a strong possibility that Owens-Illinois would accept it.

“It will be hard to turn down since it’s not an offer that assumes the company will be broken apart and management fired,� said Arthur M. Stupay, an analyst with the investment firm of Prescott Ball & Turben Inc. in Cleveland. “They (Kohlberg Kravis) are willing to include management in the scheme. That’s significant.�

However, should Owens-Illinois contest the bid, it is armed with some takeover defenses including a “poison pill� shareholders rights provision.

The provision, aimed at making a hostile takeover prohibitively expensive, gives stockholders the right to buy shares of the acquiring company at half price in the event of an unwelcome acquisition.

Owens-Illinois, with about 44,000 employees worldwide, earned $144.1 million on revenue of $2.74 billion in the first nine months of 1986.

For the past several years the company has been restructuring many of its operations, notably in its basic glass container business, and shedding certain assets to become a more efficient producer and to improve profits.

At the same time, the company has diversified into areas it believes offer strong growth prospects, such as health care.

Earlier this year, for example, Owens-Illinois sold a major paper mill and related assets for $230 million, and in October it acquired Care Corp., a nursing home concern, for about $101 million. OWENS-ILLINOIS AT A GLANCE One of the largest manufacturers of packaging products, including glass, plastic and paper containers, Owens-Illinois has also begun to diversify into health care and financial services.

In millions 1985 1984 1983 Sales $3,674 $3,510 $3,422 Net Income 156 136 69

Assets (Dec. 31, 1985): $3.306 billion Employees: 44,000 12-mo. price range (NYSE): $25.75 - $52.25 Thursday’s close: $51.00