Henley Group Plans to Sell Kellogg Co. to Dallas Firm
In a deal that is coincident with its efforts to raise money for a possible acquisition of Santa Fe Southern Pacific Corp., Henley Group has signed a letter of intent to sell its M. W. Kellogg Co. subsidiary to Dresser Industries of Dallas.
Although the sale price of Kellogg, a Houston-based oil and gas processing and construction business, was not disclosed, sources close to the deal who asked not to be identified said Dresser will pay Henley about $100 million in cash and take over an unspecified amount of Kellogg’s liabilities.
Henley spokesman Norman Ritter said that the Kellogg sale has been in the works for several months and that it is not directly tied to Henley’s efforts to acquire SFSP. Henley, which owns 14.7% of SFSP stock, has agreed with SFSP on a $63-per-share, or $8.4 billion, price for the remaining shares and is reportedly trying to arrange financing.
While SFSP has specified that it would recommend only an all-cash tender offer from Henley to its shareholders, Henley has offered SFSP a cash-and-securities package equal to $63 per share.
Also mulling a takeover of SFSP is Olympia & York Developments, a Toronto-based real estate and energy company that already owns 6.9% of SFSP shares. Olympia & York is also in discussions with SFSP regarding a possible $63-per-share cash tender offer for the remainder of SFSP shares.
Kellogg has annualized revenue of $900 million and employs about 2,500 people. Dresser expects to report revenue of $3.1 billion for the year ended Oct. 31 and employs about 30,000, spokesman Herb Ryan said Friday. Dresser is a worldwide supplier of energy and mining exploration and development products and services.
Kellogg is among the companies in Henley’s Wheelabrator Group but was not included in those spun off as part of Wheelabrator Technologies Inc., a Henley unit that held an initial public stock offering in September.
Because of the fall in oil prices and the resulting shrinkage of the domestic oil exploration and development industry, both Kellogg and Dresser have scaled back their operations dramatically in the last several years. Kellogg’s current employment is down from 8,000 in 1981; Dresser’s payroll is down from 58,000, Ryan said.
Dresser’s impending purchase of Kellogg is part of a strategy to concentrate on energy-related businesses. In the past month, the company has sold its Dresser Leasing and its Reliance Standard Life Insurance subsidiaries.
Henley, a multi-industry conglomerate based in La Jolla, was formed in May, 1986, when Allied-Signal Inc. spun off 35 businesses, including Kellogg. Dresser will be Kellogg’s sixth owner since 1980, Ryan said.
