Crown seeks to sell its assets

Investment bank hired

bond debt is a worry

Firm in `difficult environment'

315 gasoline stations, 2 refineries on the block

January 14, 2003|By William Patalon III and Julie Bell | William Patalon III and Julie Bell,SUN STAFF

Crown Central Petroleum Corp., the owner of refineries and gas stations whose Baltimore roots stretch back nearly 100 years, has hired an investment banker to help it sell the company - as a whole, or piece by piece.

Crown has hired New York-based Park Avenue Equity Management LLC to help sell its two Texas gasoline refineries, its 10 product terminals and its 315 retail locations.

"While this was a hard decision, we believe that, in view of the difficult environment faced by independent refiners and retailers during the past year and a half, it is the right thing to do," Frank B. Rosenberg, Crown's president and chief executive officer and a great-grandson of the company's founder, said yesterday in a news release.

John E. Wheeler Jr., Crown's chief financial officer, said Crown faces too many challenges to continue doing business.

Its refineries, in Tyler and Houston, Texas, are dwarfed by those of major industry rivals, experts have said, and they need an estimated $30 million to $40 million in work to make them modern enough to comply with new clean-air and other environmental requirements.

Its chain of gasoline stations and convenience stores also needs millions of dollars worth of marketing makeovers. That they are spread thinly from Texas to Pennsylvania makes that difficult and poses marketing challenges.

And, the firm's leaders face increasing worries about $125 million in debt from publicly traded bonds that come due in February 2005.

Crown's history in Baltimore dates to 1910, when Rosenberg's maternal grandfather, Louis Blaustein, founded American Oil Co., or Amoco. The Lithuanian immigrant and his son, Jacob, left an indelible mark on the oil business by inventing the drive-through filling station.

The Blausteins lost control of Amoco after Standard Oil of Indiana acquired 50 percent of the company in 1925. But the family became one of the largest shareholders in what is now BP Amoco, and got into refining five years later when a company led by Louis Blaustein bought a 48 percent stake in Crown, which had been started in 1917 by Texas wildcatters. The company went public in 1935.

Putting the company's assets on the auction block was "certainly a tough decision," Wheeler said, especially because of the possible hardships a sale will pose for Crown's estimated 2,500 employees, the vast majority of whom work away from its Baltimore headquarters. "This is a tough decision, it certainly is. We have a lot of long-term people, a lot of really good people."

But Crown likely has little choice: It's too small to compete with such giants as Exxon Mobil Corp., or even second-tier players such as Amerada Hess Corp. It lacks the resources needed to modernize, grow and compete on an equal footing. Neither does the company have a specialized niche, which would shield its business, a management consultant said.

"In a forest [inhabited] by bigger and bigger elephants, there's no place for something like a calf" to hide and thrive, said Janet C. Barnard, a management consultant and retired professor of management from the Rochester Institute of Technology College of Business. "It's too bad they ... didn't have a niche, something different about them" that would have enabled the business to thrive.

But putting now-privately held Crown up for sale may not be the answer, either, history has shown.

In late February 1999, Crown announced that it had hired the energy group of the Credit Suisse First Boston investment bank to devise ways to reward the local company's long-suffering shareholders.

Crown had incurred $139 million in losses during the 1990s, after a decade of mostly good years in the 1980s, when the company earned $181 million. Crown's Class B shares sagged from more than $28 a decade ago to as low as $4.63 in December 1999.

The low price attracted the attention of Apex Oil Co. of St. Louis. Apex CEO Paul A. Novelly, who held about 15 percent of Crown's Class A voting shares, proposed a merger of the two companies in November 1999. As a merger condition, Novelly wanted to oust Crown Chairman Henry Rosenberg and take the job himself for a three-year term. A bidding war between Apex and Rosemore Inc. - a private holding company owned by the Rosenberg family - ensued.

At the same time, union workers who had been locked out of Crown's plant in the Houston suburb of Pasadena since early 1996 were waging a boycott of the company. The workers opposed Rosemore's bid and hailed Novelly's acquisition offer when he said that the union dispute would have to be resolved before any merger could be completed.

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