Frates Group Hikes Stake in Kaiser, Still Seeks Control

A group of investors that unsuccessfully tried to take over Kaiser Aluminum earlier this year disclosed Wednesday that it has increased its stake in the company and remains interested in gaining control of the nation’s third-largest aluminum producer.

The group, led by Tulsa, Okla., businessman J. A. Frates, said it now owns 11.76 million shares, or 26.47%, of Kaiser Aluminum.

Leonard T. Conway, a member of the Frates group, said the investors are still interested in taking over the Oakland-based company but have made no specific plans.

“We don’t have any present intention to take any additional action,” he said.

The Frates group could buy more stock or may opt to sell all of its holding, Conway said.

Bought 1.7 Million Shares

A Kaiser Aluminum spokeswoman said company officials would have no comment until they review the Frates group’s latest filings with the Securities and Exchange Commission.

Conway said the group bought 1.7 million shares on the open market through Aug. 11, including a nearly 1.4-million-share block purchased on the New York Stock Exchange at $15.25 per share.

The Frates group made the purchase because the stock price, which has fallen since the group lost its bid to gain control of Kaiser in April, “got to the point where we thought it was worth an additional investment,” Conway said. “The market is telling everyone what this company is worth absent our participation in it,” he said.

Kaiser’s stock closed at $21 a share on the NYSE on April 29, when both Kaiser and the Frates group said the dissident shareholders had lost a bid to oust Kaiser’s board. Kaiser’s stock closed at $16.50 on Wednesday.

Conway said Kaiser Aluminum, which recently reported a $29.6-million second-quarter loss, has posted “the worst results in the aluminum industry.”

“We don’t have any confidence in the current (management) group,” he said. “I think it’s safe to assume by virtue of the significant investment we have made that we remain hopeful that we will ultimately be able to make a change there.”

Although Kaiser’s second-quarter loss was an improvement from the $32.1-million loss in the same quarter last year, the company said it may not live up to its earlier prediction of profitability for the year if aluminum prices and shipments of fabricated aluminum products do not improve.

The Frates group spent months trying to take over Kaiser Aluminum, which it intended to restructure.

First, the group offered to buy the company for $20 per share--$7 in cash and $13 in unspecified securities. That offer was increased twice, ending at $28 per share--$10 in cash and $18 in securities.

All of the offers were rejected by Kaiser’s board as “highly speculative.”

Then the group sought shareholder consent to toss out Kaiser’s directors. When that move failed, the group mounted a slate of directors at Kaiser’s annual meeting in April. After the Frates group lost that fight by a margin of more than 4 1/2 to 1, it withdrew its $28-per-share offer.

Much of the latest stock bought by the Frates group was held by Batterymarch Financial Management. A Batterymarch spokesman said the stock was sold based on a recommendation by the Boston company’s computerized investment system, which ranks the company’s holdings based on several factors, including cash flow and stock price.