As late as Saturday morning Square D Co.`s chief executive was still juggling some alternatives to Groupe Schneider`s unsolicited takeover bid for his company and still talking to four prospective equity investors.
By late that night he had an agreement in principle with Schneider after Schneider raised its offer $10 a share, to $88 each.
The last several days have been a blur for Jerre L. Stead, chairman and president of Square D, and the next several weeks are likely to be almost as hectic.
With Schneider of France expected to close its $2.23 billion purchase of Square D May 28, Stead is likely to spend much of the next month explaining this combination of two major electrical-equipment manufacturers to employees, distributors and customers.
So perhaps it isn`t surprising that Stead, 48, expects to delay a decision on his future at Square D until after a California vacation he plans to take from late June through early July.
In an interview Wednesday at Square D`s headquarters in Palatine, Stead said Schneider Chairman Didier Pineau-Valencienne asked him to head the new Square D, which is to run the combined North and South American operations of the two companies. Alternatively, he was asked to stay through at least a one- year transition.
”I told him I wanted to take time off to think things over a bit,” said Stead. ”After I get back, I said I would sit down and talk to him and see if it makes sense for me to stay on.”
Pineau-Valencienne and Stead aren`t strangers. Between September 1988 and last fall they held sporadic talks on possible joint ventures and selected asset sales, but couldn`t reach agreement.
Square D also was talking to other companies about alliances abroad. Stead said Square D was close to an agreement on a ”significant alliance”
with a company he declined to identify when, in February, Schneider proposed buying Square D for $78 a share, or $1.98 billion.
After the Square D board rejected Schneider`s offer as inadequate, Stead and his advisers began working on economic alternatives to the Schneider bid and legal defenses against it.
Had Schneider been blocked in court or by the U.S. Justice Department on antitrust grounds, Stead said Square D might have tried to appease disgruntled shareholders and to prop up the price of its stock by buying back some shares. He said a repurchase of 10 to 15 percent of Square D`s outstanding shares was under consideration and could have been financed with internal cash and proceeds from previously planned asset sales.
Stead said he and his advisers also were working on a recapitalization plan that would have been ”more than competitive with (Schneider`s initial bid of) $78 a share.”
However, he said a recapitalization valued at more than $88 a share
”would not have been a good risk.”
The recapitalization would have been coupled with an equity investment by a ”strategic” partner, an industrial company that would be interested in joint ventures with Square D. Stead said an equity investor could have received convertible preferred stock, the exact amount of which would have been subject to negotiation.
Stead said that up to Saturday morning he was talking with four potential strategic investors, one of which might have been willing to buy Square D outright. He also was in touch with several banks, which he said were prepared to finance a recapitalization. He declined to identify the prospective investors or banks.
But Stead`s options began to narrow Friday, when the Justice Department`s antitrust division decided not to act to block Schneider`s offer.
The decision ”was a surprise and a major disappointment to us,” said Stead. He said it created doubt whether Square D`s private antitrust suit could succeed.
Within hours of the decision, Schneider`s investment banker contacted Square D`s investment banker to see if a meeting could be arranged.
Stead, Pineau-Valencienne and their respective advisers met Saturday afternoon in New York. Stead wasn`t formally authorized by his board to conduct merger negotiations, but he said he telephoned board members throughout Saturday to keep them apprised of the talks.
By late Saturday Stead and Pineau-Valencienne had signed a merger agreement in principle, after getting Schneider to raise its bid to $88 a share and to provide sufficient assurances about the future of Square D and its employees.
Stead still had to sell the deal to his board. After a 3 1/2-hour meeting Sunday, the Square D board accepted the offer, but the approval wasn`t unanimous.
Stead declined to say what the vote was or to disclose who voted against the deal.
