The history behind International Specialty Products’ attempt to buy the Dexter Corporation dates back to 1998. Dexter was in the process of buying a controlling stake in a company called Life Technologies, with a view to a takeover. ISP started to buy stakes in both companies as a way of halting the deal. By September that year Dexter had a 52% stake in Life Technologies, ISP owned 9.9% of Dexter and 21.7% of Life Technologies, which was just enough to stop Dexter getting the 80% shareholder approval it needed to acquire more.
That was the position for the next year, but ISP’s deal-hungry chairman, Sam Heyman, grew anxious to unlock the value of the stakes he had taken in the two companies. He made some suggestions to Dexter, but the board regarded him as more of a corporate raider than a shareholder offering constructive advice; Heyman had a reputation for taking stakes in companies and breaking them up.
Eventually, in December 1999, Heyman made an offer for Dexter itself, for $45 a share. Dexter’s board hired Lehman Brothers to assess the adequacy of the offer, and rejected it after the bankers said it was too low; at the time the stock was trading in the low $30s, but that was a 52-week low and the stock had traded as high as $50.
Lehman’s next piece of advice was to make an offer to the minority shareholders of Life Technologies to buy them out for $49 a share. “This was where we went on the offensive,” says Omar Abboud, head of the global chemicals group at Lehman. “If the shareholders accepted, then the fight would be over. Dexter would own all of Life Technologies. If the shareholders rejected the deal, then we had proof that even ISP thought its $45 a share bid for Dexter was too low.”
ISP rejected the offer, and a highly contentious and very public battle ensued. Heyman made press releases out of his letters to Dexter’s chairman, and tried to get shareholders to put ISP-friendly people on the board. In March ISP upped its bid to $50 a share.
Dexter, meanwhile, “decided in February to maximise near-term shareholder value, and having determined that the greatest value could be achieved by selling the company as a whole or in parts, started to look for buyers for its non-woven, electrical components and polymer systems businesses.”
But they also were willing to consider those willing to buy all of the company, including ISP – provided the price was right. Heyman’s letters got more aggressive. “Your threats to dismember the company with the piecemeal sale of one or more businesses smacks of scorched-earth tactics which, while they may operate to entrench your management, may only destroy shareholder value for Dexter shareholders.”
The proceeds from the sale of the other main businesses, he argued, would only go to pay off taxes and golden parachutes for executives. In the meantime, he reduced the offer back to the original $45 a share, claiming volatile markets and the costs of maintaining a takeover bid as the reasons.
Dexter prevailed, however. On June 20 it sold the two businesses for a total of $675 million “in a tax-efficient way,” says Abooud, while ISP tried to get a Connecticut court to declare the sales illegal. That left Dexter’s stake in Life Technologies as its main asset, and a couple of weeks later the board announced a $1.9 billion merger with Invitrogen.
On August 15 2000 Dexter, the oldest company still traded on the New York Stock Exchange, ceased to exist and delisted. Its defence strategy against being bought by a hostile bidder was to break itself up. “The irony was that if Dexter could get control of 100% of Life Technologies its goal was to find a way to acquire Invitrogen,” says Abboud. “In the end Invitrogen acquired Life Technologies through the acquisition of Dexter for $62.50 a share and approximately a 40% premium to ISP’s offer,” says Abboud.
As for ISP, Heyman is now chasing a new reluctant target, Hercules Corporation.
