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, do not think Buchsbaum's offer is as sweet as it should be for shareholders.
Last week Shamrock Holdings of 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 Inc. as an investment adviser.
If Shamrock launches a bid for Holly and is successful, it would be the second major agricultural acquisition for the group, which is owned by the family of Roy E. Disney, Walt Disney's nephew, and run by former entertainment attorney Stanley P. Gold. Shamrock has said it wants to diversify into cyclical businesses, such as agriculture and energy, that are depressed now but have good long-term prospects.
Bought Soybean Processor
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-based 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, for each share, includes $35 cash and a share of a new class of preferred stock. That stock would have a redemption value of $90 a share and an annual dividend of $7.20 that would be paid starting in 1988.
In addition, the offer provides for an extra payment if sugar prices and Holly's sugar profits reach specified levels.
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's vice president of corporate development.
Brookehill President Walter Grossman would not comment on his group's filing.
Holly executives and representatives of 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 buy-out could range from $100 to $130 a share. But one New York arbitrageur said he and other stock traders who specialize in betting on takeovers are skeptical that a buy-out will occur. Buchsbaum has tried to take the company private for five years, he noted, but has failed because of financing problems.
Won Control in 1981
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 heads a partnership that owns 8.5% of Holly's stock, would not comment Monday on the Shamrock or Brookehill filings but said he is confident that 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 more restrictive federal sugar import quotas, which 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 beet-sugar prices have hurt Holly's performance. In the year ended last 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.
Buchsbaum said a five-member committee of outside directors is evaluating the management buy-out offer and will consider the views of Shamrock and Brookehill. But no meetings are scheduled with representatives of either group, he said.