Polaroid's bid to avert takeover could prove futile

Things are developing at Polaroid - but not quite according to plan. The instant-film manufacturer restructured last week in an attempt to thwart takeover. Many analysts at the time thought the move would mean a brighter picture for Polaroid.

But Wednesday, Roy Disney's Shamrock Holdings Inc. made a hostile bid for the troubled company. He offered $40 a share on 61.92 million outstanding Polaroid shares.

After the announcement, Polaroid stock gained $6, closing Wednesday at $40.

``Our attitude is to sell it in the market at the current price,'' says Charles Ryan, an analyst at Merrill Lynch Capital Markets in New York. He doesn't see a high degree of enthusiasm for the stock beyond its current price.

Eugene Glazer, an analyst at Dean Witter, agrees. ``We've stated previously we think that's around the right value for a public company.''

Mr. Disney, nephew of the late animator Walt Disney, does not yet have the money in place to make the purchase. And Polaroid is expected to fight his unfriendly offer.

``I think there is a fair risk that he cannot pull off the whole deal,'' says Mr. Ryan.

``There's a lot of skepticism with this bid,'' agrees William Relyea, an analyst with Eberstadt Fleming Inc. of New York.

Even if Disney fails, however, Polaroid seems certain to be acquired by someone, says Robert Maney, an analyst with Prudential-Bache in Rochester, N.Y. ``At this point, it's practically a non-fightable situation,'' he says. ``I do not see how they can stop it. I think they're done.''

He predicts that Polaroid's stock could go as high as $45 or $50.

So Shamrock's bid will not be a snap. To pave the way, Shamrock filed two suits against Polaroid and its directors. One suit was filed in Massachusetts in a bid to overturn the Bay State's anti-takeover law. The law has already been held unconstitutional, so this suit is routine, according to a litigation analyst who asked not to be named.

The other suit, however, was filed in Delaware, where Polaroid is incorporated, and is key to Disney's effort.

``He's trying to unravel the restructuring,'' says Ryan.

Under Delaware law, Shamrock would need to hold 85 percent of the filmmaker's common stock to make immediate acquisition of Polaroid. As part of its anti-takeover move last week, however, Polaroid created an employee stock ownership plan (ESOP) with 10 million new shares. The ESOP put 14 percent of its common stock in the hands of its workers. That leaves 86 percent of the common stock outstanding - and the 1 percent margin is too close for Disney's comfort. Thus Shamrock's suit to invalidate the ESOP, which it says makes Polaroid overdependent on borrowing.

Shamrock is a private company that avoids disclosing its revenue, but its sales performance was reportedly similar to that of Polaroid, which saw $1.76 billion in 1987 sales. Shamrock's holdings include three television stations, 14 radio stations, and Music Plus, a California chain of 56 home-entertainment stores.

What are Polaroid's options in defending itself?

Analysts say the company took steps last week to avoid takeover.

``The first line of defense is what they've already done,'' says Mr. Relyea. Beyond that, however, things start to come out of focus.

``You do have the potential that they'd do it themselves,'' says Mr. Glazer - that Polaroid would arrange a leveraged buyout, acquire all its stock, and become a private company.

But Mr. Maney suggests that a friendly takeover is the best option that Polaroid has at this point. If it were taken over by a hostile buyer, Polaroid could see its chemical, optical, and electronic products spun off. To stay intact, the company needs a white knight, he believes.

``Their best shot would be to approach Kodak management and say, `Get us out of here,''' says Maney. ``They could also go to Fuji with an offer.'' Beyond those American and Japanese film giants, West Germany's Agfa-Gevaert would also be an attractive company, he says.

But Ryan is not so sure that Eastman Kodak would come to the rescue. ``I think Kodak's interest would be thwarted by the Justice Department,'' he says.