The Kuwait Petroleum Corp., Kuwait's state-owned oil company, yesterday bought Santa Fe International Corp., a major California-based oil drilling contractor, for $2.5 billion.
The takeover, which represents one of the biggest investments in U.S. industry by any oil-exporting nation, was approved unanimously by Santa Fe's directors. The Kuwaitis agreed to pay $51 in cash for each share of Santa Fe stock, which was selling at $24 3/4 when trading was suspended Friday at the request of the company.
Kuwait, one of the richest members of the Organization of Petroleum Exporting Countries, has also made two other major investments in American oil operations this year, entering into joint ventures with smaller firms in Arizona and Hawaii.
Rep. Benjamin S. Rosenthal (D-N.Y.), chairman of the commerce subcommittee of the House Government Operations Committee who last week conducted hearings on U.S. investment by oil-exporting countries, said through aides last night that he expected a thorough investigation of the Santa Fe deal by the Interagency Committee on Foreign Investment in the United States, which is headed by the Treasury Department.
The committee has the authority to request the Kuwaitis to delay completion of the transaction while it conducts an inquiry. Rosenthal said he wants such a request to be made. He expressed concern that "OPEC countries are holding us up at both ends," in oil prices and in takeovers of U.S. industries.
According to an announcement issued at Santa Fe's headquarters in Alhambra, Calif., the company will become an operating subsidiary of Kuwait Petroleum, retaining its own name and management. Santa Fe reported net income of $80.9 million on revenues of $1.2 billion last year.
Kuwait Petroleum "plans to invest substantial additional capital in the company to enhance its ability to develop its existing resources and to carry on its growth," said E. L. Shannon Jr., Santa Fe's chairman. The directors called a special meeting of stockholders for Dec. 1 to approve the sale.
Former president Gerald R. Ford and Roderick Hills, a former chairman of the Securities and Exchange Commission, are both members of the Santa Fe board. The company is not connected with Santa Fe Industries, the holding company that owns the Santa Fe Railroad.
Kuwait Petroleum Corp. produces and markets almost all oil and gas in the Persian Gulf emirate of Kuwait, which has reserves second only to those of Saudi Arabia in the Middle East. According to Treasury Department figures, Kuwait had a current-account cash surplus of about $15.5 billion last year. Its population is only about 1.3 million, of whom only about half are Kuwaiti citizens.
According to figures presented to the Rosenthal committee by the Treasury, oil exporting countries had an estimated total investment in the United States of $69.8 billion as of the end of June. About half of that was in U.S. government securities and another $13 billion was in commercial bank securities, leaving only a relatively small proportion in corporate stocks and bonds.
Unlike Saudi Arabia, which has a stated policy against acquisition of more than five percent of any foreign company, Kuwait has a relatively aggressive and visible investment program, and has made well-publicized purchases of U.S. real estate.
Earlier this year, Kuwait Petroleum reached an agreement with Pacific Resources Inc., of Honolulu, to enter a joint venture for operating its Hawaiian Independent Refinery Inc. and to supply the refinery with 67,900 barrels of oil a day.
In June, Kuwait agreed to put up $100 million to form a 50-50 partnership with a Phoenix concern, AZL Inc., to explore for oil, gas and minerals.
The Committee on Foreign Investment concluded that the Hawaiian refinery venture "did not have negative implications for the United States." It has not yet issued its findings on the Arizona investment.
David Mizrahi, editor of Mideast Report, a New York newsletter that monitors the activities of Arab investors, has said that Treasury's estimates of OPEC investment in the United States are too low by at least half. Kuwait alone, he told the Rosenthal subcommittee last week, may account for $55 billion in U.S. investment.
Yesterday Mizrahi said that in view of Kuwait's refinery investments, "it follows that Kuwait Petroleum Corp., which is the most dynamic government-owned corporation in the Arab world, would take one step further into U.S. drilling operations."