Polaroid Gets Unsolicited $2.3-Billion Buyout Offer From Disney Family Group

An investment group led by Shamrock Holdings, a Burbank investment firm owned by Roy E. Disney and his family, disclosed Wednesday that it owns 8% of Polaroid Corp. and wants to buy the rest of the company for about $2.3 billion.

The unsolicited, $40-a-share bid for the instant photography giant came only a week after Polaroid had unveiled an anti-takeover plan that included restructuring and a big shift in marketing strategy that includes selling conventional film for cameras.

Polaroid, based in Cambridge, Mass., has been considered a takeover target in part because of speculation about the amount of damages it might be awarded in a patent infringement case against Kodak. In 1985, a federal judge found that Kodak had violated Polaroid’s instant photography patents. Damages have not been awarded, but analysts estimate that they could range from $300 million to $5.7 billion.

As an alternative to its $40-a-share bid, Shamrock said it would consider offering a lesser amount plus a share of the after-tax proceeds recovered in the Kodak case.

The plans disclosed by Polaroid last week include repurchasing $300 million of its own stock, selling a conventional film for cameras and forming an employee stock ownership plan with 9.7 million shares, making the stock plan the company’s biggest shareholder with a stake of nearly 14%. All those actions were viewed as efforts to ward off unwanted takeover bids.

Stock Issued

Shamrock said its bid hinges on whether it can reverse the issuing of shares to the employee stock plan, which it said will entrench Polaroid’s management. On Wednesday, Shamrock sued Polaroid in Chancery Court in Delaware, where Polaroid is incorporated, seeking to rescind the plan.

If Shamrock is unable to reverse that plan, the cost to buy Polaroid at $40 a share would rise by about $400 million to $2.8 billion. A source close to Shamrock said the company has not ruled out bidding for the additional shares if the court rules they were validly issued.

A Polaroid spokesman said the stock has been issued. That would boost the number of Polaroid shares outstanding to 71.6 million and dilute Shamrock’s stake to about 6.7%.

In a statement, Shamrock President Stanley P. Gold described Polaroid’s decision to enter the conventional film business, which would pit the company against such giants as Kodak and Fuji, as a “half-baked marketing proposal” and “a pedestrian attempt to give the company new direction.”

For its part, Polaroid said it would study Shamrock’s offer but made it clear its directors prefer the restructuring plan to a takeover. “We firmly believe that this is, without doubt, the right course for Polaroid and for all of its shareholders, employees, customers and communities,” the company said in the statement.

Speculation among traders and analysts was that a larger film company, such as Fuji, might be interested in buying Polaroid. Shamrock’s offer touched off a fierce buying frenzy on Wall Street. Polaroid shares rose $6 to close at $40, with 6.1 million shares traded.

Polaroid’s founder, inventor Edwin Land, introduced the world to instant photography in 1948 with his first instant camera, the Polaroid Land Camera Model 95. In 1972, the company introduced the popular SX-70 model, which took color pictures that photographers could watch develop.

One of Polaroid’s biggest assets is its name. To the post-World War II generation, “Polaroid” is synonymous with instant photography. In a recent survey measuring the image power of major corporations in the United States, Polaroid was ranked No. 38, according to Landor Associates, a design and image consulting firm.

In recent years, however, sales of Polaroid’s instant cameras have declined sharply, to about 3.5 million cameras a year from more than 7 million in the early 1980s, according to analysts familiar with the company. In large part, the decline has come because of the growth in one-hour photo development labs and easier to use 35-millimeter cameras.

4% of Stock Accumulated

Nonetheless, Polaroid has improved profitability. Its earnings of $116.1 million in 1987 were up 12% from the year before.

Roy E. Disney, 58, is the nephew of Walt Disney and the son of Walt’s brother, Roy O. Disney, who was considered the financial brains behind the Disney empire. Gold effectively runs Shamrock for him.

Shamrock, rumored for about six months as a possible suitor for Polaroid, began buying the stock in early 1988, according to court records. By June, it had accumulated about 4% of the stock.

According to Shamrock, its executives scheduled a meeting in New York on June 16 with I. MacAllister Booth, Polaroid’s president and chief executive. According to Shamrock, the meeting was canceled while Roy Disney and his wife, Patty, were traveling to New York for the meeting in a Shamrock corporate jet.

According to a filing with the Securities and Exchange Commission, Shamrock has two partners--Oregon Partners, which owns 1.2 million shares, and Indiana Partners L.P., which owns 3.4 million shares.

Oregon’s general partners are Gold and Yvette Bluhdorn, the widow of Charles G. Bluhdorn, founder and chairman of Gulf & Western Industries who died in 1983.

The company would not disclose the partners in Indiana except Shamrock, which is its general partner. Members of the Bass family, who worked closely with Disney and Gold to make top management changes at Walt Disney Co., have been rumored to have been buyers in Polaroid stock.

Industry analyst Charles K. Ryan at Merrill Lynch Research said it is difficult to value the potential Kodak settlement. Estimates ranges from $300 million to $5.7 billion, he said. Furthermore, it might be a few more years before an actual award is settled upon, he said.

Peter Enderlin of Smith Barney, Harris Upham & Co. said Polaroid is worth between $45 and $50 a share, based on its instant photograph business and the settlement it would receive from Kodak. Therefore, he expects the bidding to beyond Shamrock’s $40-a-share offer.