NEW YORK — Santa Fe Southern Pacific on Wednesday rebuffed an offer by Henley Group to buy $780 million worth of new SFSP stock for $17.50 a share, complaining that such a purchase would give Henley "effective control" of the company.
Henley now owns 15.7% of SFSP, a railroad, real estate and energy company headquartered in Chicago. Henley, based in La Jolla, is a manufacturing, engineering and financial services concern.
In a letter to Michael D. Dingman, chairman and chief executive of Henley, Robert D. Krebs, president and chief executive of SFSP, said:
"Your offer would have the Henley Group obtain approximately 35% ownership of Santa Fe Southern Pacific Corp.'s shares. That ownership percentage would transfer effective control of the company without the payment of a control premium to our shareholders. In addition, the offer would dilute the interests of all of our shareholders except for the Henley Group."
A Henley spokesman, Norman Ritter, said, "We are disappointed but not surprised" by the rejection.
Krebs said in the letter that SFSP's own planned restructuring package, which on March 1 will pay shareholders $25 in cash, $5 in debt and a share of the restructured company, is a better deal for the shareholders than Henley's offer.
Anthony Hatch, transportation analyst with New York-based Argus Research Corp., said the rejection was to be expected. "Santa Fe is worth much more than $17.50 a share," he said.
In another development, Olympia & York SF Holdings, a subsidiary of the Canadian firm of Olympia & York Developments, said in a filing with the Securities and Exchange Commission that it had asked SFSP to amend its bylaws to exempt itself from a new anti-takeover law in Delaware.
The bill, which went into effect earlier this month, would prohibit hostile acquirers from merging with target companies for three years after an offer is begun. This three-year prohibition could be bypassed, however, if the acquiring company purchases at least 85% of the target company's stock in a single transaction.
Olympia & York, based in Toronto and controlled by the Reichmann family, owns 10.65% of Santa Fe Southern and has made a tender in an effort to bring its total holdings to 19.9%
The Olympia & York action was taken, a spokesman for the company said, "to make the company a friendly party in this restructuring process." The Canadian company recently agreed to support the restructuring in exchange for two seats on SFSP's board.