Crown Central Petroleum Corp., a tightly controlled Baltimore oil refiner that owns a regional chain of filling stations, received an unsolicited merger offer from a St. Louis millionaire yesterday.
Paul A. Novelly, a Missouri oil and real estate tycoon, sent a letter to Crown's board of directors urging them to merge its operations into Novelly's St. Louis-based Apex Oil Co. Novelly cited Crown's depressed stock price and the attractiveness of joining Crown's refining operations with Apex's wholesale marketing department as reasons for the merger.
Crown's thinly traded stock closed yesterday at $5.75, up 12 1/2 cents, on the American Stock Exchange.
According to the Nov. 8 letter, Novelly proposes that Apex shareholders receive newly issued Crown Class A common shares equaling 35 percent of Crown after the merger. Because Apex is privately held, it's unclear what the value of the combined company would be. Novelly also proposed refinancing $125 million of Crown debt at better terms.
John E. Wheeler Jr., Crown's chief financial officer, confirmed that the company received the letter yesterday but had not responded. He said executives are reviewing the offer with their financial adviser, lawyers and the company's board.
In February, Crown hired Credit Suisse First Boston to seek a potential buyer for the company. Novelly chose to bargain directly with the board rather than going through Credit Suisse, so the move could be considered hostile. Novelly has owned Crown stock for 16 years but began increasing his stake in June.
"The letter was unsolicited, so that kind of speaks for itself," Wheeler said.
Novelly and several trusts controlled by family members and associates own 10.7 percent of Crown Central Petroleum, the largest single stake save the 49 percent owned by the family of Crown chief executive Henry Rosenberg.
Novelly did not return phone calls to his office yesterday.
Crown, with just $1.2 billion in sales in 1998, has become an oil industry anachronism. Relatively small, independent and family-owned in an industry that is consolidating rapidly, Crown owns two Texas refineries and 350 filling stations that bear its name. Rosenberg is the grandson of Jacob Blaustein, the founder of Amoco Oil whose descendants form one of the richest families in the United States.
Crown, however, has been a poor performing company for several years. Its stock price hit a high in 1996 of $40, but labor troubles at its refineries and a slump in the oil industry have hit it hard. It has lost more than $52 million since the beginning of 1998, including a $6 million loss in the third quarter.
CAPTION: CEO Henry Rosenberg's family owns 49 percent of Crown.