Coastal’s Bid for ANR Has Detroit Worried
The industrial base of this Rust Bowl city has suffered just about every type of economic loss imaginable in the last five years--bankruptcies, layoffs, plant closings and the flight of businesses to the Sun Belt.
But a new kind of threat to one of Detroit’s most important economic assets appeared on the horizon Monday, creating new worries for community leaders: American Natural Resources Co., one of the largest and most civically active corporations based in Detroit’s struggling downtown area, is now caught up in a hostile, $2.27-billion takeover attempt.
ANR, a diversified energy and transportation conglomerate with $4 billion in assets--including a huge natural gas pipeline network connecting the Southwest with the upper Midwest--became the target of Coastal Corp., a smaller, Houston-based gas pipeline firm.
Coastal, which had announced Friday that it planned to make a bid for ANR, said Monday that it was offering, through a subsidiary, $60 per share for all of ANR’s 37.8 million shares outstanding.
ANR common shares were the second-most actively traded issue Monday on the New York Stock Exchange, rising $6.25 to close at $60.
Although Coastal’s offer was well above ANR’s stock prices in recent weeks of $38 to $42 per share, ANR Chairman Arthur R. Seder Jr. quickly rebuffed Coastal on Monday by terming its offer “inadequate” and vowing to fight to keep ANR independent.
ANR officials say they are in the midst of studying a number of possible defensive measures to counter Coastal’s bid. Analysts believe that those include a leveraged buy-out by management and a so-called poison-pill defense, in which the company would issue new stock to make it more difficult for Coastal to acquire it.
ANR added Monday that its board already has met to review Coastal’s offer and will announce what it plans to do about the takeover attempt by March 15.
But well before Coastal’s announcement Friday, ANR officials had heard rumors of a possible takeover and had begun to take some initial defensive measures. On Feb. 20, ANR said it would begin to buy back 2 million of its own shares. And last Thursday, the company restructured its oil and gas holdings in an attempt to increase the price of its stock.
ANR, arguing that the value of its reserves was not reflected in its stock price, said it planned to sell 15% of the reserves to limited partnerships at prices that it hoped would prove to investors that remaining reserves were undervalued.
While shoring up its financial and legal defenses, ANR already has lined up some significant community support in Detroit in its bid to fend off Coastal. Detroit Mayor Coleman A. Young quickly issued a statement saying that Coastal’s takeover attempt “must be viewed with grave concern” because of the possibility that Coastal might end ANR’s “commitment” to downtown Detroit.
“To have a Detroit-based company turned over to a Houston corporation cannot be good for Detroit,” Young said, adding that he is “prepared to take whatever steps are necessary” to keep ANR as an independent, Detroit-based company.
100 Years in City
Little known outside the Detroit area, ANR has attracted such heavyweight local support because of its importance to the city’s attempts to revitalize its troubled downtown area.
Unlike the Big Three auto companies, ANR--with 10,800 employees nationwide and 1,600 in Detroit--is based in the heart of downtown in a 29-story headquarters building located next door to Mayor Young’s offices in Detroit’s City County Building.
Based in the city for 100 years, it recently expanded downtown by buying and occupying two towers of the financially ailing Renaissance Center complex near its headquarters. And, along with Michigan Consolidated Gas Co.--Detroit’s natural gas utility that was an ANR subsidiary until it was spun off at the end of 1981--the company is in the midst of a $30-million project to develop town houses, condominiums, retail shops, a park and a marina on a blighted stretch of downtown waterfront along the Detroit River.
In interviews with Detroit newspapers over the weekend, Seder warned that, if Coastal succeeds, the river-front project might be canceled and ANR’s headquarters moved out of Detroit, delivering yet another economic blow to the city.
On Monday, an ANR spokesman argued that, since Coastal is already heavily burdened with debt, the only way that it could finance ANR’s acquisition would be to sell off many of its assets--probably ending the company’s civic involvement in Detroit.
“With Coastal’s debt levels, there is no way they could acquire a company our size and not begin to bust it apart,” said ANR spokesman Michael Brogin.
Still, Coastal spokesman Bob Wells insisted that the Houston firm, led by its colorful chairman, Oscar Wyatt Jr., has no plans to break up ANR or move its headquarters out of Detroit.
“We’ve told Seder twice that we wouldn’t break up ANR, but he doesn’t believe us,” Wells said Monday. He added that Coastal wants to keep ANR in its current form because its pipeline system would mesh nicely with Coastal’s network, which primarily serves Colorado and other Western states.
Bitter Fight Expected
Some analysts don’t believe that ANR can survive this fight as an independent company.
“We are looking for the whole thing to be resolved at about $65 per share, and to be resolved only after a bitter fight,” said Don C. Bustos, an analyst with the Duff & Phelps investment firm in Chicago. “But I don’t expect to see ANR still listed on the stock exchange (as an independent firm) by the end of the year.”
Bustos sees Coastal’s bid for ANR as part of a larger process of consolidation in the natural gas pipeline business, which is suffering from excess pipeline capacity at a time of relatively modest growth in gas demand.
American Natural Resources Co. at a Glance The Detroit-based energy firm has major interests in natural gas pipelines and storage, gas and oil exploration and production, coal, synthetic fuels, new energy technologies and trucking.
1984 Revenues $3.493 billion Operating Income $444 million Net Income $196.1 million Assets $4 billion 1983 Revenues $3.343 billion Operating Income $455.7 million Net Income $171.3 million Assets $4.09 billion
