Hong Kong Investors Buy 5.7% of Smith International Shares
A Hong Kong company with a wide range of investment interests has paid more than $4 million in the last five weeks for a 5.7% stake in ailing Smith International Inc., the Newport Beach oil services and equipment company now operating under a Chapter 11 bankruptcy reorganization.
Industrial Equity (Pacific) Ltd. bought nearly 1.3 million shares of Smith common stock, at prices ranging from $2.55 to $3.60 a share, for itself and five affiliated companies, according to a document filed with the Securities and Exchange Commission. Industrial Equity said it purchased the shares for investment purposes.
“I like to see that kind of trading,” Robert Gubrud, Smith International’s vice president and treasurer, said of the unusually high volume of activity in Smith’s stock in recent weeks.
Despite the IEP purchases, however, Smith closed Tuesday on the New York Stock Exchange down 12 1/2 cents at $3.25 a share.
Gubrud said he knew nothing about Industrial Equity except what the SEC document contains. No one from the investment company has contacted Smith International executives, he said, though he expects a “courtesy call” soon.
The SEC requires any investor who buys 5% or more of a publicly held corporation to file a statement of its identity and to reveal its stake in the company and its intentions.
IEP’s statement, filed Monday, says that Industrial Equity acquired the Smith shares “for investment purposes” because stock in the company appears to be an “attractive” opportunity now.
Industrial Equity said in its filing that it may acquire more Smith shares in the future but that it had “no present plans or proposals” to acquire the company, force a merger, change directors or make any other material changes.
Second-Largest Shareholder
The stock purchase makes the Hong Kong company the second-largest shareholder. The largest is Robert E. Torray & Co. Inc., a Bethesda, Md., investment company that owned 18.7% of Smith International as of February. Robert E. Torray, president of the company that bears his name, said Tuesday that he has no intention of selling his Smith stock “under any conditions.”
Industrial Equity is operated by money managers in Australia, New Zealand and the United Kingdom. Most of its stock is owned directly or through two other companies by Brierley Investments Ltd. in Wellington, New Zealand.
Industrial Equity uses its wholly owned subsidiary, Auckland Pension Funds Ltd., for its securities investments in U.S. corporations. Brierley, Auckland Pension and two other companies joined Industrial Equity in filing the SEC document.
Among the company’s U.S. investments is the Higbee Co., a department store group in northeast Ohio. IEP also owns a stake in Kerr Glass Manufacturing Corp. in Los Angeles and Ameron Inc., a Monterey Park construction equipment company.
Smith International, reeling from $221 million in losses over the past three years and a $204.6-million judgment against it in a patent infringement case, filed for bankruptcy protection March 7 to get some much-needed breathing room while it sorts out its troubled finances.
It has been selling a number of assets since the bankruptcy filing and has an appeal of the patent verdict pending in the U.S. Circuit Court of Appeals in Washington, D.C.
