New Zealand investor Ronald A. Brierley broke his truce with cement giant CalMat on Wednesday, offering $40 a share, or about $998 million, to take over the firm.
CalMat, based in Los Angeles, said its board would meet soon to consider the offer, and other alternatives that were said to include a financial overhaul or a management buyout.
Brierley, who owns 19% of CalMat's shares though his Hong Kong investment firm, Industrial Equity (Pacific) Ltd., has haltingly pursued the company for more than a year and controls two seats on CalMat's board.
Only three months ago, Brierley signed a so-called standstill agreement with CalMat, under which Brierley agreed not to increase his stake beyond 20% unless he bought the whole company. Brierley also agreed that any offer for CalMat stock would be subject to the company's "poison pill" anti-takeover measure, a spokesman for CalMat said.
Reached in the firm's New Zealand offices, Bruce Hancox, executive director of Industrial Equity (Pacific), said Brierley's company made its bid because it is "happy and comfortable" with CalMat. "The obvious thing is to make an offer for the whole company," he said.
Hancox said that if IEP's bid is accepted, it didn't plan any management changes at CalMat. Although he didn't rule out the sale of some CalMat businesses, he said: "We have no plans to alter the direction of CalMat. . . . This bid is in no way based on the company's break-up value."
Hancox said IEP hasn't had any discussions with the Dan Murphy Foundation, a charitable organization formed by the heirs of CalMat's founders that owns 13.8% of the firm's shares.
Stock Price Soars
Reached at his office at Security Pacific National Bank, Oscar T. Lawler, vice president of the foundation and a CalMat director, said the charitable organization "was a shareholder like any other." Asked whether the foundation was likely to support CalMat's management, Lawler said, "Obviously, we're not at war with management." But Lawler said he couldn't comment further since he didn't know the details of IEP's offer.
In composite trading on the New York Stock Exchange on Wednesday, CalMat's shares soared $13.50, closing at $45.375, indicating that investors expect the bidding to go higher.
James S. Schmitt, an analyst who follows CalMat closely for Westcounty Financial, said CalMat was worth as much as $50 a share, depending on the value assigned to its embattled cement business.
Schmitt said a prospective buyer might sell the cement business to support a bid. Though CalMat is one of the nation's largest cement producers, it faces heavy competition from low-priced Mexican imports, which now account for about one-quarter of the Southern California market.
Schmitt said the cement business might fetch between $350 million and $450 million, possibly from a foreign cement maker looking to expand in the United States. Japanese firms have recently acquired an interest in two Northern California cement makers.
CalMat, with earnings of $78.1 million last year, is the largest supplier of concrete, asphalt and gravel in California, Nevada and Arizona, Schmitt said. The company was formed in 1984, through the merger of Conrock, a sand and gravel supplier, into California Portland Cement.
Sold Several Businesses
The company owns about $500-million worth of land in California that it has only recently started to develop, Schmitt said. One of its developments include an office and hotel complex in Mission Valley, an area near San Diego where CalMat owns about 100 acres of prime real estate.
Schmitt said that until recently, CalMat has been slow to expand its construction supplies business beyond Southern California and to develop real estate no longer needed for its business. "It was an old line Los Angeles company that was very conservative, perhaps too conservative," he said.
Recently CalMat has sold a number of businesses to focus more on construction supplies. In 1985, it sold Statex Petroleum, an oil and gas exploration business, and last year, it sold Valley Reclamation to Waste Management, taking a $24.9-million gain on the sale.
Last fall, CalMat hired J. P. Morgan & Co. as its financial adviser to look for ways to enhance the value of the firm to shareholders. In a statement Wednesday, A. Frederick Gerstell, CalMat chief executive, noted the company has sold assets over the last few years, and was now studying "more aggressive steps which the company can take to continue this ongoing process."
CalMat at a Glance
A major producer of cement, aggregates and ready-mixed concrete and asphalt in California, Arizona and Nevada for the construction industry, the company also has substantial land holdings and is developing properties in California and Arizona.
Year ended Dec. 31 1987 1986 1985 Sales (millions) $658.9 $619 $578.3 Net income (millions) 78.1 44.1 40.5
Assets $662.8 million
Shares outstanding 30.5 million
12-month price range $22-$45.375
Wednesday close $45.375, up $13.50