Sunshine Mining Co. Offers $865 Million to Buy Rexene

Sunshine Mining Co. said Tuesday that it plans to acquire plastics maker Rexene Corp. for about $865 million, a step the silver mining company hopes will help it escape the cyclical trap of commodity prices.

Officials for the Dallas-based firms said they plan to sign a letter of intent for Sunshine, known primarily for silver mining and natural gas production, to pay $28 for each of Rexene’s 30.9 million shares of common stock in cash and securities.

Sunshine said the tentative agreement will become binding only if Sunshine and Rexene can agree on the specifics of the cash and securities mix.

The deal is subject to shareholder approval.

Rexene, through its subsidiary Rexene Products Co., makes thermoplastic resins and petrochemical products. Its products are used in many household goods, including food packaging, toys, plastic lining used in diapers, and styrene used in disposable cups and other containers.

Rexene Shares Lower

The bid received a chilly reception on Wall Street, where the price of Rexene shares fell $2.50 to $22, leaving the stock some $6 under Sunshine’s offer of $28 a share in cash and securities.

Sunshine has not yet specified how the $28-a-share price will be broken down and some securities analysts said the uncertainty had lowered the price of Rexene shares.

“It’s a letter of intent from someone with no money,” said one Wall Street trader of Sunshine’s offer.

Ivan Obolensky at Josephthal & Co. said Sunshine, a silver and gold miner and an oil and gas producer, has been losing money since 1985 and should make losses again this year. “Obviously there’s going to be (earnings) dilution for Sunshine” if the acquisition is made, Obolensky said.

No Layoffs Planned

Sunshine Chairman and Chief Executive G. Michael Boswell said the Rexene purchase is part of the company’s strategy to acquire a third business related to natural resources but that runs counter-cyclical to oil, gas and precious metals prices. Sunshine’s precious metals and oil and gas operations currently contribute equally to revenues.

“Sunshine’s acquisition of Rexene fits this criteria, as the bulk of Rexene’s raw materials are derivatives of natural gas liquids,” he said.

Boswell said Sunshine plans no layoffs and will run the new business using the current management.

Rexene said last week that it was in talks to be acquired. The company sold shares to the public in August at $21.50 each after going through a $456-million leveraged buyout last April.

At that time two partnerships, one comprising employees of Drexel Burnham Lambert Inc. and another controlled by partners of Gilliam Joseph Littlejohn & Levy, a New York-based merchant banking firm, bought Rexene, putting up only about $6 million. The remainder of the purchase price was borrowed, with Drexel conducting the transaction. The two partnerships stand to profit by more than $400 million if the deal with Sunshine goes through.

“We hope to reach a definitive agreement quickly and look forward to working with Sunshine,” said Rexene’s chairman and chief executive, Andrew J. Smith.

For the six-month period ended Sept. 30, Rexene reported revenue of $369 million and pretax income of $104 million.

A Sunshine spokesman said the company is carrying about $200 million in long-term debt. The company has said that it expects its current businesses to be profitable in 1990.