Crown Central adopts `poison pill'

Troubled company says policy gives time for evaluating options

February 02, 2000|By Kristine Henry | Kristine Henry,SUN STAFF

Crown Central Petroleum Corp.'s board of directors instituted a shareholders' rights plan yesterday that would make it more difficult for a raider to take over the company.

The "poison pill" plan, which was announced after stock markets closed, comes just months after the head of St. Louis-based Apex Oil Co. proposed a takeover.

The Baltimore-based refiner has been losing cash for years, and last February hired Credit Suisse First Boston to evaluate "strategic alternatives" for the company, which could include selling all or part of the business. Crown said it does not know when Credit Suisse will make a recommendation.

In a November letter to Crown's board of directors that was filed with the Securities and Exchange Commission, Paul A. Novelly, who holds just under 15 percent of Crown's Class A voting shares, proposed that Crown and Apex combine.

Novelly proposed running the new entity for three years, ousting Henry A. Rosenberg Jr., Crown's chairman, chief executive and president. Crown executives have declined to comment on the offer, other than to say it will be considered.

Under the one-year plan adopted unanimously yesterday by the eight-member Crown board, the poison pill would go into effect if a group or person acquired 15 percent or more of either the company's Class A or B shares. The B shares hold one-tenth the voting power of the A shares.

"What it does is preclude a raider, or one who acts like a raider, from being able to orchestrate what would otherwise be construed as abusive tactics," Crown Chief Financial Officer John E. Wheeler Jr. said yesterday.

Members of the Rosenberg family control more than 50 percent of the voting shares, Wheeler said. The only other group that has a major block is Heartland Advisors Inc., a Milwaukee investment fund.

Wheeler would not say whether Apex's move prompted the poison pill.

"Our legal counsel and investment bankers believe at this time that to maintain an orderly process, this was the most formidable thing to recommend to the board," he said.

Crown, which employs 180 people at its headquarters and an additional 2,700 nationwide, has been in the red for years and over the last decade it lost money every year but three. Its Class B shares have declined from more than $36 in 1989 to close at $6.625 yesterday, and Class A shares went from more than $40 a decade ago to $7.

The company has said it's a hostage to the margin between what it pays for crude oil and the price it can get for gasoline. Crown, with a combined capacity of 152,000 barrels a day at its two plants in Texas, is also substantially smaller than most of its competitors and does not have the economies of scale that would help it succeed.

Many analysts and former investors concede that those factors have contributed to Crown's poor performance, but they say company officials should have merged or sold years ago.

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