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Holly Sugar Investors Want a Sweeter Offer

January 20, 1987|JAMES BATES | Times Staff Writer

Holly Sugar Chairman Michael S. Buchsbaum wants to take the nation's third-largest beet sugar producer private. But two investment groups, including Roy E. Disney's Shamrock Holdings, don't think Buchsbaum's offer is as sweet as it should be for shareholders.

Last week, Shamrock Holdings in Burbank said in a letter to Holly, filed with the Securities and Exchange Commission, that the Buchsbaum-led offer appears to be inadequate. Shamrock, which owns 5.5% of the Colorado Springs, Colo.-based company's 1.12 million shares, said it may make its own offer to buy Holly.

An investment group led by Brookehill Equities, a New York brokerage company, is also unhappy with the Buchsbaum proposal. The Brookehill group, which owns 11.8% of Holly's stock, said in its own SEC filing last week that it may offer to buy Holly and has retained PaineWebber as an investment adviser.

Wants to Diversify

If Shamrock launches a bid for Holly and is successful, it would be the company's second major agricultural acquisition. Shamrock, owned by the family of Roy E. Disney, Walt Disney's nephew, and run by former entertainment attorney Stanley P. Gold, has said it wants to diversify into cyclical businesses like agriculture and energy that are depressed now but have good long-term prospects.

In 1985, Shamrock, which also owns television and radio stations, paid $350 million and assumed $75 million in debt to acquire Central Soya, a soybean processor in Fort Wayne, Ind. Shamrock also has a controlling interest in Enterra, a Houston-based oil services firm, and owns 4% of Foote, Cone & Belding, a Chicago advertising firm.

Buchsbaum and a group that includes other members of Holly's management team have offered to buy the company for a complicated package that includes $35 cash and a share of a new class of preferred stock that has a redemption value of $90 a share and an annual dividend of $7.20 that would start payment in 1988. In addition, the offer includes a pay-out contingent on sugar prices and Holly's sugar profits.

Hints From Shamrock

So far, Shamrock is only hinting that it might bid for Holly. "I think it's evident that shareholders perceive that the offer doesn't reflect the true value of the company," said R. Rudolph Reinfrank, Shamrock vice president of corporate development.

Brookehill President Walter Grossman would not comment on his group's filing.

Holly executives and representatives from Shamrock refused to estimate what they think the Buchsbaum offer is worth per share. Holly's stock has been trading above $100 a share lately and closed Monday at $105, giving the company a market value of nearly $118 million.

Some analysts have previously said that a buyout could range from $100 to $130 a share. But one New York investment risk assessor said he and other stock traders who specialize in betting on takeovers are skeptical that a buyout will occur because Buchsbaum has tried to take the company private for five years, failing because of financing problems.

Control of Holly

Buchsbaum, a Marin County-based investor and former head of arbitrage trading at Ladenburg, Thalmann & Co. in New York, won control of Holly in a bitter proxy fight in 1981. Buchsbaum, who owns 8.5% of Holly's stock through a partnership he heads, wouldn't comment Monday on the Shamrock or Brookehill filings but said he is confident the latest offer from his investment group, Arcanum I Partners, is financially sound.

He said Holly is a stronger company now than when he previously tried to take it private, in part because of new reductions on federal sugar import quotas that will ease competition and because the company's plants have been made more energy-efficient. In the six months ended Sept. 30, Holly earned $2.3 million, or $2.04 a share, compared to a loss of $141,000, or 13 cents a share, a year earlier. Revenue increased 11.8% to $155.7 million.

In the past, however, soft prices for beet sugar have hurt Holly's performance. In the year ended March 31, Holly earnings fell 57.7% to $2.1 million, or $1.91 a share, with revenue dropping 9.7% to $260.2 million.

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