Illinois Central Agrees To Be Bought By New York Conglomerate
CHICAGO (AP) _ Illinois Central Transportation Co., the owner of the Illinois Central Railroad, has accepted a $436 million takover bid from the Prospect Group, creator of a successful railroad in Mississippi three years ago, the companies announced.
The announcement came six weeks after the New York-based conglomerate launched the unsolicited $20-a-share cash takeover offer for the Illinois Central, a major carrier of freight between Chicago and the Gulf of Mexico. The railroad originally gave a neutral reaction to Prospect’s bid.
Prospect and Illinois Central said in a joint statement Friday that the railroad had accepted the bid.
Illinois Central, which has 21.8 million shares outstanding, is a spinoff of the Chicago-based Whitman Corp. that began trading as an independent company Jan. 3 at $11 a share.
The railroad formerly was called the Illinois Central Gulf. Whitman is the name adopted last year by the former IC Industries.
″The (Illinois Central) board has unanimously determined that the Prospect offer and the merger ... are fair to, and in the best interests of, the shareholders of Illinois Central,″ said Harry J. Bruce, chairman and chief executive officer of the railroad company.
Illinois Central’s financial adviser, Merrill Lynch Capital Markets Inc., found the offer to be fair to shareholders, the statement said.
W. Wallace McDowell Jr., chairman and chief executive officer of Prospect, said the company looks forward to ″continuing the long and fine traditions of the Illinois Central and working with the company’s many excellent employees and customers.″
The Prospect Group owns MidSouth Corp., a regional railroad based in Jackson, Miss., that has enjoyed great success since Prospect created it three years ago, partly with the purchase of Illinois Central track.
″It was one of these dream stories,″ Prospect spokesman Don Dwight said Friday in a telephone interview from New York. ″It was profitable in its first year (1987), with revenues of $55 million and net earnings of $5 million, and it did much better in 1988, with $80 million in revenues and $8.7 million in earnings.
″That was Prospect’s introduction into railroads, and it eventually led to the interest in acquiring Illinois Central,″ he said.
Illinois Central stock closed at $19.75 a share Friday on the New York Stock Exchange, down 87 1/2 cents. Prospect shares closed unchanged at $9.12 1/2 in over-the-counter trading.
In addition to MidSouth, Prospect owns or is affiliated with such diverse businesses as the Forschner Group Inc., the U.S. marketer of Swiss army knives, based in Shelton, Conn.; several insurance companies; and the Dallas- based National Spirit Group, which runs cheerleader camps and owns the company that manufactures cheerleader uniforms.
Prospect recently sold Murray Bakery Products Inc., based in Augusta, Ga., the largest supplier of cookies to the Girl Scouts of America.