New Zealand Investor Boosts Stake in Smith

A New Zealand investment group has increased its stake in financially ailing Smith International to 15% and is seeking to place two representatives on the board of directors of the Newport Beach oil services company.

G. W. Neely, Smith chairman and chief executive officer, has rejected Industrial Equity (Pacific) Ltd.’s request for director representation.

Neely and other Smith officials were not available to comment Friday.

However, an analyst who follows the company said the Smith officials are worried that Industrial Equity, which has been steadily buying Smith stock since October, has a takeover bid up its sleeve.

Seen as Hostile

“What that (the rejection of Industrial Equity’s request) means to me is that Neely considers the minority shareholder as a potentially hostile group,” said Herb Hart, an oil service analyst with S. G. Warburg Inc.

Industrial Equity, the Hong Kong investment arm of New Zealand-based Brierley Investments, insists that it has no current takeover intentions. But it also says that, as Smith’s largest single shareholder, it will continue to push for two board positions.

According to a document that Industrial Equity filed Friday with the Securities and Exchange Commission, the investment concern bought 192,100 shares of Smith International for $5 a share, or $960,500, on Jan. 5. That increased its ownership in Smith to 15% from 11.2%.

In trading on the New York Stock Exchange on Friday, Smith shares closed at $4.75, up 12.5 cents.

Sought Representation

The document goes on to say that an Industrial Equity representative telephoned Neely on Jan. 28 and asked for two of the investment company’s representatives to be elected to Smith’s board. Neely declined, the document says, but “IEP intends to continue to seek to have two of its representatives elected to the board of directors. . . . “

Ron Langley, Industrial Equity’s president of North American operations, said Friday that Industrial Equity made its request because “we have a substantial investment in the company and we would like to more closely monitor that investment.”

He said Industrial Equity believes that it could assist Smith in coping with its problems, including the fact that it is operating under a Chapter 11 bankruptcy reorganization and faces a $204.6-million judgment against it in a patent infringement case.