The takeover battle for control of Texas Gas Resources Corp. intensified yesterday as both the "white knight"--CSX Corp.--and the hostile bidder--Coastal Gas Corp.--upped the ante.
The management of Texas Gas acted to make itself less attractive to Coastal by recommending that its directors approve a company offer to buy shares of its own stock at less than either of the two bidders.
In Washington, meanwhile, Texas Gas and Richmond-based CSX--the nation's largest railway system--asked the Interstate Commerce Commission to deny a coastal attempt to block their merger.
But the main action yesterday in the takeover battle centered around the financial markets as Coastal Gas attempted to lure more Texas Gas stockholders to its side. It increased its offer by $10 a share, from $45 a share, for about half of Texas Gas' 20.6 million shares, making its total bid worth $1.05 billion, compared with CSX's original $954 million purchase price. Coastal proposed buying the rest of the shares for about $48 a share in stock or other security.
Analysts figured the blended bid amounted to $51.50 a share in cash and securities. CSX responded by amending its offer of $52 a share to include all of CSX' 20.6 million shares instead of just the first 7.1 million that were tendered.
This move, along with Texas Gas' recommendation that it buy up to 10 million shares of its own stock at the far lower price of $45 a share, were seen on Wall Street as an attempt to take advantage of the perception that Coastal does not have the capital to get involved in an expensive takeover action. This would drain $450 million from the company's coffers and make it harder for Coastal to raise the money needed to buy Texas Gas. "Coastal is seen as having to stretch itself really thin to raise the ante," said Graeme A. Lidgerwood, an analyst who follows CSX for Kidder, Peabody.
CSX, on the other hand, is seen as having a great deal of maneuvering room in a takeover battle--with large cash reserves from the sale of other properties late last year. It can raise its bid without diluting earning, Lidgerwood said.
The stock market appeared to agree with that analysis. CSX and Texas Gas stock both increased--CSX up $1.675 a share to $71.50, Texas Gas up $2.875 to $52.625 a share--while Coastal Gas remained unchanged at $27.
Coastal, however, said that its increased debt is only temporary and will not increase if it wins control of Texas Gas.