KaiserTech Ltd., parent company of Kaiser Aluminum & Chemical, said Monday that it has agreed to a cash buyout offer of about $718 million from Los Angeles-based Maxxam Group.
Maxxam, a real estate and forest products company that is the world's largest producer of redwood lumber, controls 32% of the stock in the Oakland-based KaiserTech.
Maxxam is offering $19.375 a share for about 37 million outstanding shares that it doesn't already own. A special committee comprised of KaiserTech directors accepted the offer Sunday. The deal still must be approved by KaiserTech shareholders.
The agreement was reached about two weeks after Maxxam, controlled by Houston financier Charles Hurwitz, announced its interest in buying KaiserTech. The plan was presented Saturday and approved by the KaiserTech board Sunday. A KaiserTech spokesman said the board also considered a buyout proposed by an investor group that included KaiserTech management.
On Monday, KaiserTech shares closed at $17.875 a share, down 25 cents, in composite trading on the New York Stock Exchange.
The announcement follows moves by Hurwitz to consolidate other holdings. On Friday, Maxxam officially became a subsidiary of MCO Holdings Inc., a Los Angeles-based real estate development company.
Maxxam Group also owns Pacific Lumber Co., which has received widespread criticism for speeding up the cutting of old-growth redwoods in Northern California.
Hurwitz, chairman of MCO, is interested in KaiserTech primarily because it is the third-largest company in an industry that is rebounding, said James Iaco, senior vice president for finance at MCO. The resurgence can be traced to a rise this year in the value of aluminum ingot, Iaco said.
"A look at the aluminum industry shows it's done a complete turnaround," Iaco said. "Most industry analysts are very bullish on aluminum. It's a great opportunity."
While most industry analysts cite positive industry trends, some say MCO and Maxxam also wanted KaiserTech because the company's losses in recent years could provide tax benefits.
"He (Hurwitz) buys KaiserTech and gets an aluminum operation--while not the greatest aluminum operator, it's viable," said William Siedenberg, an analyst at Smith Barney, "and he gets U.S. tax losses carry-overs to shelter income."
Siedenberg said Maxxam would probably sell some of KaiserTech's foreign operations to reduce the debt the company would assume in acquiring the aluminum firm. However, he noted that the company probably would not consider selling KaiserTech's operation in the west African nation of Ghana because it is a relatively cheap source of ingot. A number of analysts said KaiserTech may sell operations in England and Australia.
Management Changes Expected
Of the domestic facilities, KaiserTech's smelting and metal-rolling operations in Spokane are considered the jewels and would be retained by Maxxam, according to Robert Maloney, an analyst at the Toronto-based Wood Gundy investment firm. Maloney said the U.S. aluminum industry will have a strong year partly because the devaluation of the U.S. dollar has boosted the cost of imports, making domestic goods more attractive, said Maloney.
Maloney and other analysts said Maxxam would probably make some management changes at the aluminum company--KaiserTech's board of directors may be eliminated, for example. However, they do not predict sweeping changes in the executive ranks.
Explained Sean St. Clair of Duff & Phelps: "Hurwitz is a natural resources guy, but he doesn't have much experience in the aluminum industry."
The KaiserTech offer is the company's second run through the the takeover game recently. The company last year fought off an unsuccessful attempt by Oklahoma investor Joseph Frates and British investor Alan Clore. The battle ended when Kaiser Aluminum, as the parent company was then known, reorganized as part of an agreement with Clore, who had bought out his partner Frates. In exchange for a $140-million investment, Clore--KaiserTech's chairman--was given the right to name of a majority of the directors.
Even so, Clore's nomination of board members later became the subject of a legal dispute. On Monday, KaiserTech said parties involved in disputes will ask the court to put off action on the lawsuit because a sale to Maxxam would make a lawsuit meaningless.
Maxxam gained control of 32% of KaiserTech in February when Clore agreed to sell his stake to Hurwitz because the October stock market crash forced him to default on loans secured by the stock.