National Intergroup Inc., in its second major announcement in less than 24 hours, said Friday that it has agreed to buy Houston-based Permian Corp., a large, independent crude oil transportation company, for $172 million.
The majority owner of Permian is Wesray Capital Corp., whose chairman and principal shareholder is former U.S. Treasury Secretary William E. Simon. A minority share in Permian is held by the company’s employees.
The announcement comes on the heels of the news Thursday that National Intergroup is selling its financial-services subsidiary, First Nationwide Financial, to Ford Motor for $493 million.
Will Join Board
Terms of the Permian deal call for National Intergroup to pay Wesray and the other shareholders in roughly equivalent amounts of cash and stock. National Intergroup will finance the sale by issuing 3 million new shares of stock and pay for the rest in cash.
Simon and Wesray co-owner Raymond Chambers will join National Intergroup’s board and own about 9% of National Intergroup’s stock when the deal is complete. The sale is expected to close next month.
National Intergroup, which has been under attack in recent months by unhappy institutional shareholders, also said its board has authorized the repurchase of up to 4 million shares of company stock “as conditions warrant.” National Intergroup now has 20.3 million common shares outstanding.
News of the sale drew a lukewarm reaction on Wall Street, which had bid up National Intergroup’s stock $1.25 a share on Thursday to $29.875 in apparent anticipation of the First Nationwide sale. But the stock fell 62.5 cents a share Friday after the Permian purchase was announced.
Changing Business Strategy
National Intergroup, a Pittsburgh-based holding company that last year sold off a 50% interest in its National Steel subsidiary to Japanese steelmaker Nippon Kokan K.K., is a company that’s trying mightily to change its stripes.
“Our objective is to diversify into businesses which are not capital or labor intensive and which have a consistent, predictable earnings stream,” said its chairman, Howard Love.
Love insisted that Permian will provide a steady flow of cash because it “provides a service to the domestic oil industry which is needed regardless of the selling prices of oil.”
Permian, once owned by Los Angeles-based Occidental Petroleum, buys crude oil from domestic producers and resells the petroleum to refiners. The firm handled more than 150 million barrels of crude oil in 1984, and it had operating earnings of about $96 million on sales of $4.7 billion in the 12-month period ended May 31.
Wesray, founded in 1981 by Simon and Chambers, bought Permian from Occidental in 1983 through a leveraged buy-out, using Permian’s assets to finance the purchase.
Wesray--the name is a combination of Simon’s initials and Chambers’ first name--paid Occidental $300 million in cash and gave the oil company a promissory note worth $75 million. But it is believed that the two investors had Permian assume all of the debts and that they put up little or no money of their own. Thus, the $172 million that Wesray and the other shareholders are now receiving from the sale is “pure profit,” one source close to the deal said.
Neither Simon or Chambers could be reached for comment.