Thursday, August 24, 2000

Investors to Vote on Oil Firm's Fate

By Terence Chea, Washington Post

THE BATTLE FOR the future of Crown Central Petroleum Corp. will reach its climax today when shareholders vote on a controversial buyout offer from the company's founding family.

Shareholders are being asked to approve an offer by the family of Crown chief executive Henry A. Rosenberg Jr., grandson of the firm's founder, to buy the half of Crown the Rosenbergs don't already own for $9.50 a share. But in recent weeks, the offer--which was recommended by Crown's independent directors--has come under concerted attack from Crown's estranged unions, another investor seeking to buy the company and an independent proxy-voting analysis firm.

The offer requires a two-thirds "yes" vote to be accepted, and the final tally is expected to be close. Rosemore Inc., the Rosenberg family investment company making the offer, will vote its shares in favor. The remaining stock is owned largely by institutional investors and by Paul A. "Tony" Novelly, a St. Louis oil man who has made his own offer for the company.

Crown, which was acquired by Rosenberg's grandfather in the 1930s, owns two Texas oil refineries and 327 service stations. Last year, the company had $1.3 billion in revenue.

In recent years, Crown has struggled to compete in the rapidly consolidating oil industry. Its stock price, which was as high as $40 a share four years ago, fell below $5 late last year. It has since bounced back to more than $9 a share, largely because of the competing offers from Rosenberg and Novelly.

A bidding war started last November when Novelly proposed merging his privately held Apex Oil Co. with Crown. Novelly, through several corporate entities, is Crown's biggest shareholder behind the Rosenbergs.

In March, Crown rebuffed Rosemore's bid to buy all outstanding shares for $8.35 a share.

Novelly said the price was too low and responded with a series of counteroffers.

Since then, Rosemore, the holding company, raised its offer to $9.50 a share, and Novelly counteroffered with $10.50 a share.

Earlier this month, Crown's independent committee recommended that shareholders vote to approve Rosemore's offer. It said it opposed Apex's $10.50-a-share offer, citing concerns about Novelly's financing. "There is a significant risk that Apex will not obtain acquisition financing or other sources of cash sufficient to permit consummation of its proposal," the committee said.

Last Friday, Apex sent a letter to Crown shareholders, saying Crown's independent committee had misrepresented Apex's offer and urging them to consider its $10.50-a-share offer.

Last week, Institutional Shareholder Services, an respected independent firm that advises institutional investors and mutual funds on how to vote their shares, came out against Rosemore's offer.

"The overriding factor in our decision is our belief that the Crown board and independent committee did not adequately pursue all alternative proposals and expressions of interest, including the bid set forth by Apex," the report said.

The firm said it was concerned that Crown's independent committee didn't put Rosemore's offer to a majority vote of unaffiliated shareholders only. Rosemore controls about 45 percent of the voting power of Crown's two classes of stock.

Shadowing all these moves are Crown's bitter unions. The company has been involved in a long-running labor dispute with the Paper, Alliance-Industrial, Chemical and Energy Workers International Union, which represents workers locked out of Crown's Pasadena, Tex., oil refinery since February 1996. The unions have dogged Rosenberg with lawsuits, shareholder proposals, a corporate campaign and a boycott of Crown's gas stations.

"We believe the $9.50-a-share offer is too low," said Brandon Rees, a researcher at the AFL-CIO Office of Investment, which advises union pension funds. Rees estimates that the funds own less than 1 percent of Crown. "We're cautiously optimistic that shareholders will be able to defeat this," he said.

Yesterday, union members picketed outside Crown's downtown Baltimore headquarters.

The stock is divided into two classes: Class A shares are worth 10 shares of Class B for voting purposes. Rosemore owns 49.85 percent of the Class A stock and 17.28 percent of the Class B stock. Novelly, through several corporate entities, owns 14.7 percent of Crown's Class A shares and 3.5 percent of its Class B shares. Much of the rest is owned by institutional investors.

A spokesman for Dimensional Fund Advisors Inc. of California, which with 6 percent of Crown's Class A stock controls the biggest stake after Novelly, declined to comment on how the investment firm would vote its client's shares.

The vote is scheduled for today at 10 a.m. at the Turf Valley Conference Center in Ellicott City, Md.