More Bidders for Quaker State Expected

The stock of Quaker State Corp. rose sharply on Monday as analysts said a possibly hostile $700-million offer may lure other bidders.

An investor group, led by New York-based investment bank Ardshiel Inc., on Friday proposed taking over Oil City, Pa.-based Quaker State, which holds about an 18% share of the U.S. motor oil market.

“Management could counteroffer with a recapitalization or a leveraged buyout or (there could be) a white knight,” said Lincoln Werden of Thomson McKinnon Securities Inc.

Quaker State stock rose $3.25 to $26.125, just under the $26.50 bid from Ardshiel. Ardshiel officials, who could not be reached for comment Monday, had previously said they might sweeten their bid after a review of Quaker State’s assets and operations.

Quaker State has said it would prefer to remain independent. Some analysts said a likely buyer for Quaker might be a major oil company hoping to grab its strong trademark motor oil.

However, Andrew Gray of Pershing & Co. said some major oil companies might face antitrust concerns because of fast-lubrication operations similar to Quaker State’s Minit-Lube.

Gray said Pennzoil Co. would not likely want Quaker state since it wants to add significant oil reserves, which Quaker does not have. Pennzoil is now flush with cash, having received $3 billion last week to settle its historic legal dispute with Texaco over that company’s 1984 purchase of Getty Oil Co.

“If you get involved with the major integrated companies, then I could see there’s a potential conflict in the federal trade laws,” Gray said.

Merrill Lynch analyst Beth Teppler said Quaker State might be attractive to a brands marketer. “You really need someone who would be better able to capitalize on the brand name (than) an oil company,” Teppler said.

Gray said he thought a likely bidder for Quaker would be an oil-producing country such as Kuwait or Venezuela, which would be interested in integrating and upgrading operations.

Quaker State, which had seen rising profits, lost $48.1 million last year when it took a writeoff from the closing of a refinery, contrasted with earnings of $50.3 million in 1986.