Crown Central Petroleum Corp. said yesterday it has hired an investment bank to devise ways to reward its long-suffering shareholders -- with the sale of all or part of the Baltimore oil company as one possibility.
The disclosure was included in the company's fourth-quarter and year-end earnings report that marked the seventh time in eight years that it has finished in the red.
Crown's rocky financial performance has jolted its stock, sending its Class B shares from nearly $37 in 1989 to $7 yesterday, despite the most powerful bull market in history. The Class A shares are largely held by members of the controlling Rosenberg family.
The beleaguered Crown said that it hired Credit Suisse First Boston's Energy Group to help in "evaluating strategic alternatives" -- often investment-banking parlance for putting a company on the auction block.
But it's not that simple, says John E. Wheeler, Crown's chief financial officer. Crown could be a buyer or seller, merge with another company, sell a piece of its business or buy part of another company, he said. It could even swap assets: for instance, make one of its businesses bigger by trading its refineries for another company's convenience store chain, or its convenience stores for someone else's refineries.
The recommendations that emanate from the Credit Suisse study -- which should be concluded in two or three months -- will help determine what Crown decides to do, Wheeler said.
"It's kind of like a physical," he said. "You go into the doctor and say, `Here's the situation. Let's look at all the options.' "
Possibly paving the way for the decision to seek a new strategy was Crown's Dec. 31st spinoff from American Trading and Production Corp., the Baltimore-based investment-management company set up by the descendants of Amoco Corp. founder Louis Blaustein. American Trading was split into several pieces among different groups of shareholders, with Crown going to the family of Henry A. Rosenberg Jr., Crown's chairman and chief executive officer.
Overcapacity, warm weather
Overcapacity and two consecutive warm winters have hammered the energy sector, hurting the businesses of integrated refiners and marketers like Mobil Corp., oil field-service firms like Schlumberger Corp. and even offshore drillers such as Noble Drilling Corp.
Fuel inventories are about 20 percent higher than they were two years ago and -- despite higher demand from motorists -- the glut has driven gasoline prices to their lowest level in more than two decades, eroding oil companies' profits. As a result, companies are being driven to merge: For instance, British Petroleum Corp. took over Amoco in a deal worth nearly $62 billion when it was consummated last year, while Exxon Corp. has struck a deal to buy Mobil.
Crown is a small player in a business where bigness is the table stakes.
Last Wednesday, St. Louis-based Clark USA Inc. said it wants to sell its fuel sales group, which owns almost 700 gasoline and convenience stores in the Midwest. Clark, which is a private company, runs refineries in Texas, Ohio and Illinois that can process a total of 540,000 barrels of oil a day.
By comparison, Crown has 345 convenience store outlets, 105 of which are in Maryland. It also has two refineries in Texas: one in Pasadena, which can process 100,000 barrels per day, and the other in Tyler, with a capacity of about 52,000 barrels per day.
The Pasadena refinery is running at 65 percent capacity, though that will be boosted to 78 percent March 1, while the Tyler plant is running at 75 percent of capacity, a Crown spokesman said.
No layoffs have occurred, although a long-running labor dispute has kept 252 union workers locked out of the Pasadena refinery since Feb. 5, 1996.
Not all of Crown's problems are due to low gas prices. The union has been pushing consumers to boycott Crown gasoline stations, while shareholders and locked-out workers have filed a suit against key company executives and board members alleging that their mismanagement has wrecked the company.
And because of the company's string of annual losses, most Wall Street analysts long ago stopped following Crown. For that reason, none could comment yesterday on what the company might do.
"Nobody covers them anymore," said one analyst, who asked not to be named.
Heartland Advisors Inc., a Milwaukee-based mutual fund company that buys the shares of distressed companies, recently disclosed that it had amassed 800,000 of Crown's Class B shares -- about 15 percent of the outstanding stock. Heartland did not return calls yesterday.
At yesterday's closing price, investors were valuing Crown at only 36 percent of its "book value" of about $19 per share -- theoretically what the company would be worth if it were broken up and sold off piecemeal.
Crown spokesman Joseph Coale said the company has some valuable holdings -- including the refineries, 13 terminals along two pipelines and its gas stations.