Bricker Looks for Merger Partner in Wake of Collapse of Oxy Deal : Diamond Shamrock Shopping for an Oil Firm

Chairman William H. Bricker has almost single-handedly transformed Diamond Shamrock Corp. from a Cleveland chemical company to a Dallas oil firm, and the chief executive said Wednesday that the changes aren’t over yet.

Despite his company’s abruptly canceled merger with Los Angeles-based Occidental Petroleum Corp. on Monday, Bricker said Diamond Shamrock hopes to acquire another oil company in the near future in its bid to become a larger producer of oil and gas.

Whether Bricker, 52, lost any credibility with his directors or shareholders with the demise of the Occidental agreement remains unclear. He has sometimes been criticized by analysts for making quick judgments of a situation before all the facts are in, which he apparently did in the Occidental merger.

Bricker was in favor of the deal and had informally agreed to it with Occidental Chairman Armand Hammer, but changed his mind during a 4 1/2-hour meeting with his board of directors Monday.

Bricker said in a telephone interview from New York on Wednesday that he and his directors turned against the merger after analyzing information gathered in a round-the-clock analysis over the weekend of the effect it would have on Diamond Shamrock’s business and its shareholders.

“The board was reviewing the information for the first time,” Bricker said. “They assessed how our stockholders would come out in the long as well as the short term, and then arrived at a unanimous decision to oppose the agreement.”

Part of their concern had to be what had happened to the price of Occidental stock in the few days before their meeting. The merger called for a 1-for-1 exchange of stock, and Occidental shares were selling for 50% more than Diamond Shamrock’s when merger talks began in earnest late last week.

But by the time of the board meetings to approve it Monday, the premium had narrowed to about 15%.

Sources have previously suggested that the deal may have fallen apart after Hammer called Bricker on Monday, following approval of the merger by Occidental’s board. Hammer called to pass on reservations about the price expressed by two outside directors of Occidental, sources said, and perhaps to seek a cut in the price.

That led to an angry exchange that quashed the merger, they said.

But on Wednesday, Bricker flatly denied that account.

In trading Wednesday on the New York Stock Exchange, Diamond Shamrock rose 50 cents to close at $18.625 a share and Occidental gained $0.375 to close at $25.375.

Diamond Shamrock’s 11 outside directors--seven of whom run their own companies--have a reputation for being strongly independent, but have in recent years gone along with a business strategy developed by Bricker and his staff.

That strategy, put in place after Bricker became chief executive in 1976, calls for the company to deemphasize the chemicals business where it has its roots and move further into the more profitable, but highly volatile, oil and gas business.

Bricker came to the company in the late 1960s with an unlikely background to be running an oil company. He graduated from the University of Michigan in 1953 with a degree in agriculture and then got a master’s in horticulture in 1954 before embarking on a career selling agricultural products.

Diamond Shamrock was formed in 1967 by the merger of Diamond Alkali Corp. of Cleveland and Shamrock Oil & Gas Co. of Amarillo, Tex. Bricker joined the firm in 1969 as manager of its biochemicals division and within five years was chief operating officer of the company.

As he moved into the top executive ranks, the Arab oil embargo had just led to a tripling in oil prices, providing strong evidence that Diamond Shamrock might do well to concentrate more on the oil and gas side of its business.

Bricker began a series of acquisitions that put chemicals in the shadow of oil and gas production and marketing.

Chemicals accounted for half the company’s sales in 1974 but for less than 20% in 1984.

“Our strategic message has been consistent and clear,” Bricker said. “We believe the exploration and production side of the oil business is the key place for us to be. We evolved that strategy and are firmly committed to it.”

Bricker admits that the Occidental incident has left the company vulnerable to a takeover, but not any more vulnerable than it was before the agreement became public and then fell apart.

However, he said he hopes to make an acquisition of his own before someone else can try to buy Diamond Shamrock.

He declined to provide any specifics of which company he might try to acquire, other than to say that it will be one with oil and gas operations.

He said the Occidental deal had its roots in an effort by Diamond Shamrock to reach an informal “white knight” agreement with Occidental for the Los Angeles company to come to the rescue should Diamond Shamrock become embroiled in a hostile takeover fight in its own acquisition effort.

He was in Los Angeles on Jan. 2 to negotiate final details of the white knight agreement and by Thursday was discussing a full-blown merger.

He said the companies had hoped to have longer to make a decision, but word of the discussions leaked out Friday, forcing executives and their advisers to rush through an assessment of whether a merger would be good for both sides.

Bricker declined to speculate on whether Occidental might still play the white knight role he first envisioned.

But he said he doesn’t believe that the incident has hurt his credibility, particularly because he had been willing to leave the company in a merger he thought was in the best interests of his shareholders. To be sure, he was to have received a six-year, $5-million settlement upon his departure.

But now he’s back on course with his company’s strategy.

“In the oil and gas business, one must get bigger if one is to survive,” Bricker said. “We are in an expansion mode. We are not shopping the company. We are clearly an aggressive pursuer.”