Competing Offer Emerges for Clayton Homes

Cerberus Capital Management says it can provide more value than the company's deal with Warren Buffett.
Publish date:

Cerberus Capital Management

has sent a letter to the chief executive of

Clayton Homes


saying it's interested in acquiring the maker of manufactured houses, but the takeover proposal didn't include any specific terms.

"We wish to express our interest in acquiring Clayton Homes, Inc.," a letter from Cerberus Managing Director Frank W. Bruno read. "Based on our review of publicly available information, we believe that our acquisition could provide greater value to your shareholders than the pending transaction with

Berkshire Hathaway

(BRK.A) - Get Report


The letter also indicated that Cerberus is prepared to sign a confidentiality agreement and begin due diligence immediately. Warren Buffett-controlled Berkshire agreed at the beginning of April to acquire Clayton for $1.7 billion, or $12.50 a share.

"As you may know, we recently participated in the acquisition of several businesses from


, including a business complimentary to that of the company, and believe that our acquisition of the company would represent an excellent opportunity for all constituencies," the letter continued. "Our group, at this time, consists of affiliates of Cerberus Capital Management, L.P., and with an aggregate of over $9 billion of capital under management, financing of the acquisition should not present any difficulties."

Clayton responded with a press release saying that the company's board "welcomes any transaction that maximizes value for our stockholders." The company did say it was worried that the letter arrived more than three months after the Berkshire agreement was announced and only three business days before a special stockholders' meeting.

"Until the expression of interest includes a price, terms and conditions, it is not a serious offer," Clayton said.

Clayton said that the pact with Berkshire allows the company to agree to another transaction if the board considers it superior. "However, Cerberus Capital's decision to ignore the provisions of the April 1 agreement that require any competing proposal to be in the form of a formal offer may indicate that a superior proposal will not be forthcoming," Clayton said. "If Cerberus Capital intends to present the company with a binding offer, time is of the essence."

Shares of Clayton Homes were rising 46 cents, or 3.5%, to $13.46 in recent

New York Stock Exchange