Pickens Calls Off His $1.9-Billion Homestake Bid
T. Boone Pickens Jr.’s dash for the gold fell short of the finishing line when the corporate raider’s company, Mesa Limited Partnership, on Monday withdrew its $1.9-billion cash offer for the San Francisco-based Homestake Mining Co.
The Amarillo, Tex.-based Mesa released a statement saying it has retracted its $20-per-share offer for about 97 million outstanding shares in Homestake, the nation’s leading gold producer. The offer was made Feb. 29 and presented to Homestake’s directors, who rejected the offer last week.
Mesa’s statement noted the rejection of the offer but offered no further explanation for its actions. The company did not mount a hostile takeover by making a tender offer, a bid to Homestake shareholders for a portion or all of the outstanding shares. Mesa has said it already controls about 3.54 million shares, or 3.8% of Homestake.
Homestake Stock Sinks
However, Richard Stumbo, the chief financial officer and vice president of finance at Homestake, said the 3.54 million shares would represent about 3.6% outstanding shares.
“We felt it was inadequate and not in the company’s best interest to accept,” Stumbo said. “The Homestake board decided it would be in the best interest of the shareholders to remain independent.”
In the wake of the withdrawal, Homestake’s stock closed at $15.25, down $1. However, Stumbo noted that the Monday close was 75 cents higher than on Feb. 26, the last business day before Pickens made his bid for the company. When Pickens made the offer, Homestake stock shot up $3.50 to $18 per share. The stock traded between $18 and $24 a share last year before the Oct. 19 stock plunge.
Stock values--and how Pickens and Mesa would manage their Homestake stock--were the subject of speculation on Wall Street. Stumbo said Homestake had no plans to acquire the stock from Pickens.
“We had not talked to him (about stock) and he has not talked to us,” said Stumbo.
Homestake had 1987 earnings of $146.4 million, two-thirds of it coming from Homestake’s sale of its interest in an Australian mining operation. The company, founded in 1877 by a partnership involving the father of William Randolph Hearst, has interests in oil and natural gas and mines uranium, silver and gold.
Citing the company’s finances and increased competition in gold mining--Homestake is expected to lose its leadership position in gold production to Newmont Mining Co. this year--analysts said Pickens offered too much for the company if he intended to keep and run the firm.
Some analysts looked for hidden motives in Pickens bid. Lincoln Werden, an analyst at Thomson McKinnon in New York, said Pickens may have been hoping to arouse interest in the company to entice another investment group into buying it. Under that scenario, Pickens would get a high prices for his shares.
“I’m not surprised he withdrew,” said Werden. “Unless Homestake was sitting quietly on some extra gold reserves . . . the price was high.”
Homestake executives have said they are not hiding information on the operations.
Ronald Shorr of Bear, Stearns & Co. said: “The company, at present gold prices, isn’t worth that price. I can’t find any hidden assets. . . .I don’t see that it makes a lot of sense for someone to come in and buy it.”
