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Oneida sues bidder Libbey

6 May 1999: According to a recent press report, US-based Oneida Ltd., the world“s largest maker of stainless steel and silverplated flatware, said it has filed a lawsuit against rival glassware and t…

6 May 1999: According to a recent press report, US-based Oneida Ltd., the world“s largest maker of stainless steel and silverplated flatware, said it has filed a lawsuit against rival glassware and tabletop manufacturer Libbey Inc., alleging that its distribution programme is anticompetitive. The lawsuit, filed in the US District Court for the northern district of New York, came two days after Oneida rejected a US$ 500 million unsolicited takeover bid from Libbey. In the past year, Oneida has tried to supply tabletop glassware to the foodservice industry as part of a strategy to be a “one-stop shopping” source for hospitality and leisure industry customers. Toledo, Ohio-based Libbey is in the same business. The lawsuit challenges a “loyalty programme” in which distributors can receive certain cash payments from Libbey if they can demonstrate they have not purchased similar glassware from Libbey competitors. “Libbey has severely restrained the ability of distributors and their end-use customers from offering and buying replacement glasses from anyone other than Libbey,” according to the lawsuit. Libbey chief financial officer Kenneth Wilkes denied the charges. “We don“t believe we“re in restraint of trade in any way,” he said. He also declined to say whether Libbey would launch a hostile takeover of Oneida, noting only “we“re not going to go away.” New York-based Oneida said it had rejected the merger proposal after meeting with its financial and legal advisers Morgan Stanley Dean Witter and Shearman & Sterling. In rejecting the offer, Oneida said it considered the fact that Libbey has, since August 1998, pursued litigation seeking to exclude Oneida from the foodservice glassware business. According to the report, Oneida is undergoing a recently announced restructuring, including layoffs and consolidations, which it expects will save the company US$ 16 million annually and raise its earnings. For its part, Libbey is hoping that the public disclosure of the offer will put pressure on Oneida to make a deal. “We are hopeful that the support of the shareholders of Oneida will be sufficient to persuade Oneida management to negotiate with us in good faith and proceed to the successful consummation of a merger,” Libbey chief financial officer Kenneth Wilkes said. Wilkes declined to comment on the possibility of Libbey launching an unsolicited tender offer for the shares. Oneida officials could not be reached for comment. Libbey disclosed letters to Oneida showing it had originally offered to pay US$ 26.50 a share, but raised its offer to US$ 30 after being rejected. In the letters Libbey refers to personal negotiations between executives of the two companies. Based on talks with commercial banks and its financial advisers, Libbey said it believes it would be able to obtain the financing for the acquisition. Meanwhile, Oneida Ltd. shares have surged amid speculation that the cutlery giant remains vulnerable to the takeover bid. Oneida stock rose US$ 4.31, or 20%, to US$ 25.56 in afternoon trading, a day after it rejected the US$ 30 per share cash offer from Libbey Inc. “While the board has said the company is not for sale, ultimately that may be for the shareholders to decide,” said one analyst. “There is speculation that the board is going to have to consider an offer for the company.” In turning down the offer, Oneida said it was in its best interests to remain independent and pursue a previously announced restructuring. Oneida also said it considered the fact that Libbey had launched a legal fight in 1998 to keep Oneida out of the foodservice glassware business. The issue is still unresolved.

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