Canada's wealthy Belzberg brothers launched an unsolicited $1.7 billion takeover bid yesterday for Ashland Oil Inc., one of the nation's leading independent oil marketers and refiners.
The $60-a-share bid was disclosed in a letter from Samuel Belzberg to John R. Hall, chairman and chief executive of the energy company, which is based in Ashland, Ky. The Belzbergs also disclosed in a filing with the Securities and Exchange Commission that they already own about 9.2 percent of Ashland's common stock.
Samuel Belzberg said in the letter that, if Ashland management would enter into friendly negotiations, the Belzbergs might raise their bid. But he suggested that, if Ashland management does not respond favorably to the proposal, the Belzbergs are prepared to move forward with a hostile bid.
"If you enter into good-faith negotiations with us, we believe that, working together, we can negotiate a higher price for Ashland's stockholders," Belzberg said in the letter. "If you reject our proposal and our offer to negotiate, we will consider all available alternatives.
"Because our proposal clearly offers significant value for Ashland's stockholders, we trust that you will act responsibly and serve their best interests," Belzberg said.
The Belzbergs gave Ashland management until 5 p.m. Monday to respond. They said a failure to respond will be treated as a rejection of their offer. Ashland said yesterday that it had no comment on the Belzberg bid. Meanwhile, Ashland stock moved up $2.62 1/2 to $54.62 1/2, as nearly 1.5 million shares changed hands.
Oil analyst Frederick P. Leuffer said he believes the Belzbergs' $60-a-share offer is a fair price. But he warned that the takeover bid could be dropped, sending the stock price down, if the Belzbergs engage in "greenmail" by agreeing to drop their bid if Ashland buys their 9.2 percent stake for a premium price.
"I've been telling my clients that I would be delighted to let them the Belzbergs have it" at $60 a share, said Leuffer, an analyst with Cyrus J. Lawrence Inc. "I'm not sure it's worth what it's trading for now. The Belzbergs from time to time have been engaged in greenmail. If that's all it is, and the Ashland management succumbs, then the poor investor who holds on will be hurt very, very badly."
Ashland is the parent of Valvoline Oil Co., the nation's third-biggest marketer of motor oil. It is the largest distributor of industrial chemical products and also is a leading coal producer. In addition to being a leading oil refiner and marketer, Ashland is engaged in oil and gas exploration and production.
In the fiscal year that ended Sept. 30, Ashland had revenue of $8.2 billion and net income of $147 million ($4.12 a share) versus revenue of $8.5 billion and a net loss of $172 million ($7.40) the prior year. The net loss included losses from divestitures and other write-offs of $265 million ($9.53).
Ashland turned in a strong performance in the quarter that ended Dec. 31, with revenue of $2.1 billion and net income of $48.1 million ($1.41) versus revenue of $2.1 billion and net income of $25.9 million (0.64) in the same period of the prior year.
The Kentucky General Assembly sought to assist Ashland yesterday by proposing a measure that would bar hostile takeovers of Kentucky corporations.