**GUS, ABI Increase Offers for Metromail

The bidding war for Metromail escalated March 26 as both Great Universal Stores PLC (GUS) and American Business Information (ABI) upped their offers. GUS appears to have the upper hand after a Delaware Chancery Court judge on March 27 dismissed a series of lawsuits that sought to block its tender offer.

GUS, Manchester, UK, increased its bid $3 per share to $34.50, prompting ABI, Omaha, NE, to go up $1.25 to $34.75.

ABI filed suit March 17 to nullify the GUS deal, saying Metromail failed to conduct a fair auction, issued improper stock options to management and bypassed shareholders in making the deal. Three shareholder groups filed similar suits March 23. Had an injunction been granted, the merger process would have been forced to start again from scratch.

The ruling allows the GUS deal to proceed as scheduled and be completed under the original time frame of March 31. All provisions of the tender offer remain the same except for the higher share price. GUS needs to close the deal by then to take advantage of British accounting rules.

In a related matter, GUS agreed to allow Metromail. Lombard, IL, to waive a provision that had prevented ABI from negotiating a deal with Metromail shareholders. A source close to the negotiations expected ABI to make one more serious shot before the deadline. ABI’s strategy thus far has been to top all offers by $0.25. Judging by the wording of Metromail’s recently amended 14D-9 merger recommendation, ABI will have to make a more pre-emptive offer than that and do some serious convincing to beat GUS.

In that document, Metromail’s investment banker Lehman Brothers said GUS’ offer originally was approved because it “provided a higher cash price and greater certainty for [Metromail] stockholders than any of the other indications of interest.”

In other words, GUS has the cash on hand to consummate the deal while ABI would need financing. This makes sense when you consider that ABI, with 1997 sales of $193 million is a smaller company than Metromail ($328 million in 1997).

The document also revealed that eight companies, including GUS and ABI, have expressed interest in a deal at prices ranging as high as $35 per share, but none of the other companies has made a public offer. Any offer in the $30s would not be out of line with analyst expectations.

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