Mesa Petroleum in a new bid to land another oil company
T. Boone Pickens, the colorful chairman of Mesa Petroleum, is at it again.
At a time when oil prices are depressed and the OPEC oil cartel is haggling over which of its members should cut production to keep prices from sliding into the Persian Gulf, Mr. Pickens is making a bid for another oil company.
''Mesa Pete'' said Monday it would pay $520 million to acquire the General American Oil Company of Texas. Mesa said it would pay $40 a share for 13 million shares, or 51.2 percent of General American's shares. Morgan Stanley & Company is Mesa Petroleum's investment banker. In an interview, Mr. Pickens said he had no comment on whether or not Mesa would make an offer for the remaining shares of General American. Earlier this year Mesa tried to acquire Cities Service Company, a much larger company, in a deal that ultimately would have cost it several billion dollars. Mesa later sold its shares back to Cities Service, which was merged with Occidental Petroleum in a deal valued at $4 billion.
In making its bid for General American, Mesa Pete has sets its sights on a company that is more its own size and has substantial oil reserves in North America. General American is ''basically an exploration and production company, '' Mr. Pickens said. The company, based in Dallas, reported proven reserves of 80.4 million barrels of oil and 519.4 billion cubic feet of gas as of June 30. Analysts figure its total reserves on an oil-equivalent basis are 150 million barrels. Its acreage is principally in Texas, Louisiana, and Canada. The Value Line Investment Survey figured the company's proven reserves were worth $1.1 billion, as of that date. The company also owns a mortgage banking and real estate subsidiary, Stockton, Whatley, Davin & Co.
Rosario S. Ilacqua, oil analyst at L.F. Rothschild, Unterberg, Towbin, noted that General American's assets are principally in oil. ''At a time when there is a natural gas surplus in the US,'' Mr. Ilacqua said, ''GA0's assets are essentially in oil. .. . There is a shortage of oil in the US.''
Mesa is also offering to buy the shares at a price that some may consider a bargain. According to the John Herold Company, which evaluates oil companies, the target company is worth $49.50 a share. Ann Mobley, an oil analyst with E.F. Hutton in Houston, figures Mesa's bid is worth $5 a barrel.
Analysts are split over whether Mesa will be successfull this time. Mr. Ilacqua says he thinks it might be. ''Since this is a smaller deal (than Cities Service), the prospects for Mesa winning are better,'' he said. So far Mesa has not lined up any partners for the offer but is making it by itself.
Mr. Pickens had no comment. General American officials, surprised by the offer, likewise had no immediate comment.
If Mr. Pickens is to be successful, he must convince the trustees of the Meadows Foundation, which owns 26 percent of the stock, that the offer is in their best interest. Ever since the company chairman, Algur Meadows, passed on in 1978, investors have speculated that GAO was ripe for takeover.
In fact, according to the offering circular, Mr. Pickens has met with trustees of the foundation on at least two occasions. On the first, last June 28 , he discussed a possible merger with one of the trustees who is not an officer of General American. But no offers were made. On the second, Nov. 25, a third person contacted Mr. Pickens to set up a meeting with a director of the Meadows Foundation, which is owned by the Meadows Trust. The director said the trust ''might be inclined to sell at $50 per share,'' and said it had rejected a bid of $45 a share from a nonoil-industry company eight months before the meeting.
Mr. Pickens said he believed this price was too high, since conditions in the oil and gas market had deteriorated, and he did not think the company was worth any more than $35 to $40 a share at the time of the meeting. But he made no specific proposal or offer at the time.