Olympia & York Entering Competition to Buy SFSP
Olympia & York Developments indicated Tuesday that it will join the competition to take over Santa Fe Southern Pacific, saying in a letter to SFSP that it wants to start talks immediately about a possible cash offer of $63 a share or more for the energy, transportation and real estate concern.
O&Y;, a major real estate and energy company headquartered in Toronto, is the second company in two days to express willingness to acquire SFSP.
Henley Group, a multi-industry conglomerate based in La Jolla that already owns 14.7% of SFSP shares, said Monday that it has agreed with Santa Fe Southern Pacific on a $63-a-share price for the SFSP shares it does not already own. However, Henley wants to pay the $8.4 billion total partly with securities, while SFSP so far has specified cash only.
The O&Y; letter, signed by Paul Reichmann, senior executive vice president, was in response to an invitation from SFSP to make an offer. SFSP made a similar proposal to Henley. Reichmann and his brothers, Albert and Ralph, control closely held O&Y.;
Alternative Offered
Olympia & York’s interest in SFSP, a Chicago-based company known for its two independently operated railroads, Santa Fe and Southern Pacific, was first disclosed in September when it it bought 6.18% of SFSP’s outstanding shares. In a filing with the Securities and Exchange Commission dated Monday, but which did not come to light until Tuesday, it said that it has increased its holdings to 6.94%.
As an alternative to a direct takeover, Reichmann said in his letter to SFSP that Olympia & York also would be interested in working with the company to develop a restructuring plan “with a view to creating several separate and independent public companies for Santa Fe’s principal divisions in which current shareholders would have an opportunity to participate.”
SFSP spokesman Robert Gehrt said the company is making its financial data available to both Henley and Olympia & York.
In Tuesday trading, Henley Group stock closed down 62.5 cents at $20 per share. SFSP stock rose 25 cents a share in heavy trading Tuesday to close at $55.25.
Attracted by Real Estate
The Reichmanns, frequently described as among the richest businessmen in the world, own vast real estate holdings through O&Y;, which is North America’s largest real estate developer, according to a recent article in Forbes magazine. Analysts said Tuesday that they probably have more resources to draw from than Henley for a takeover of SFSP. Several analysts also expressed doubt that Henley could raise the cash for a $63-a-share bid.
Like Henley, O&Y; is attracted by SFSP’s undervalued real estate holdings, which include prime inner-city parcels in the San Francisco Bay Area, Los Angeles and San Diego. While valued on SFSP’s books at $640 million, the properties have a total market value of between $2 billion and $9 billion, analysts said. SFSP’s real estate operation accounted for half the company’s operating income of nearly $650 million in 1986.
Assets controlled by the Reichmann family total $15 billion, Forbes said. The crown jewel of their real estate holdings is the 8-million-square-foot, four-tower World Financial Center in New York City. O&Y; also has developed major projects in Toronto and London.
In addition, the Reichmanns control a majority interest in several publicly held companies in Canada, including 80% of Abitibi-Price, which is the world’s largest producer of newsprint. O&Y; owns more than 66% of Gulf Canada Resources, a huge oil and natural gas exploration and production company.
