Canadian Partners Offer to Sweeten Bid for Dunkin’ Donuts if Lawsuit Is Won

BOSTON â€”  A Canadian partnership removed some conditions Tuesday on its $296-million hostile bid for Dunkin’ Donuts and said it would raise the offer to $308 million if it wins a lawsuit challenging the doughnut shop chain’s anti-takeover measures.

DD Acquisition Corp., a partnership of Kingsbridge Capital Group and Cara Operations Ltd., said it would raise its price to $45 a share, from $43, if Delaware’s Chancery Court orders Dunkin’ Donuts to rescind its employee stock ownership plan and other defenses.

The Toronto-based partnership’s offer originally was contingent on obtaining 75% of the doughnut company’s shares. That offer, which was set to expire at midnight Tuesday, was extended until Sept. 15 and is now contingent on obtaining just 50.1%, or a bare majority, of the shares.

“What we are saying by dropping the minimum number of shares is that we’re prepared to buy a voting control position and hang around until we get actual control, which could take a couple of years,� said Eric W. Evans, a spokesman for Kingsbridge.

Dunkin’ Donuts, which is based in suburban Randolph, had no immediate response to the revised offer. The reaction on Wall Street was lukewarm; Dunkin’ Donuts shares rose 37 1/2 cents to close at $37.87 1/2 in over-the-counter trading Tuesday.

Kingsbridge, the merchant banking arm of investor George Mann’s Unicorp Canada Corp., offered a friendly merger with Dunkin’ Donuts at $42 a share in May. When it was rebuffed, it joined with Cara, the parent company of two Canadian restaurant chains, to launch the $43-a-share hostile offer.

Dunkin’ Donuts has set up a series of tough defenses, including the employee stock ownership plan, which holds about 16% of its outstanding common shares.

It also has a shareholder rights plan, or “poison pill,� designed to increase the number of shares in the event of a takeover, making a merger prohibitively expensive.

And it has sold $28 million of preferred stock, convertible to an 11% stake in the company, to an avowedly friendly investor, General Electric Capital Corp.

Kingsbridge and Cara have filed suit in Delaware charging that the employee stock plan and preferred stock sale were improperly put in place solely to prevent a takeover. The Canadian partners also have asked the Chancery Court to order Dunkin’ Donuts to remove its poison pill.

Last week, the court refused to grant the partnership a preliminary injunction against the takeover defenses. The case has not yet been scheduled to be heard on its merits.