Damson Oil Settles Its Suit Against Seaborg
Damson Oil has settled its 4-month-old stock manipulation suit against Seaborg Inc., a Redondo Beach investment firm controlled by the Graziadio family.
The complicated settlement gives Seaborg options to buy interests in several Damson oil drilling ventures. In turn, Seaborg has granted Damson, which is based in New York, a two-year option to buy the Damson shares owned by Seaborg. Seaborg additionally promised not to influence or take control of Damson, which reported sales of $80.4 million last year.
Damson and Seaborg executives were not available for comment Monday.
In a lawsuit filed in U.S. District Court in Manhattan in January, Damson had charged that Seaborg manipulated Damson’s stock price to buy the shares at artificially low prices. Seaborg denied the allegation. Seaborg said it purchased Damson shares as an investment, because it considered them undervalued.
According to documents filed last month with the Securities and Exchange Commission that outline the settlement, Seaborg said it would sell its 9.4% stake in Damson back to Damson at prices between $2 and $2.75 a share. Seaborg would apparently lose money on those sales, as it paid more than $3.50 a share for most of its 753,600 Damson shares.
Seaborg, however, may sell off the Damson shares until Damson exercises its repurchase option.
In return, Damson said Seaborg may purchase 400,000 Class A partnership units and 800,000 Class B units in Damson Energy, a Texas limited partnership controlled by Damson, for $3.50 apiece.
Both classes of units closed Monday on the American Stock Exchange at $2.75, up 12 1/2 cents. Under the agreement, the number of units that Seaborg may purchase declines by 300,000 every six months.
In addition, Damson reimbursed Seaborg $350,000 for legal fees and gave it the right to acquire Kaiser-Francis, an oil and gas company, and Damson’s interest in a joint venture with Mobil Oil in Cameroon.
George L. Graziadio Jr., who owns 1.7% of Damson’s shares, agreed to sell them back to Damson. In turn, Damson reimbursed him for $25,000 in legal fees. Graziadio’s son, G. Louis Graziadio III, is Seaborg’s chairman.
