Offer Sends Stock Price Up 20% : Smith International Draws Buyout Bid

A Hong Kong investment firm offered Thursday to buy Smith International Inc., an oil exploration firm that recently moved its operations from Orange County to Texas and Oklahoma.

Industrial Equity Ltd., which is Smith’s largest shareholder with about 35% of its stock, did not name the price it is willing to pay.

The offer helped push the value of Smith’s shares up 20% Thursday, giving the company a market value of $366 million. Smith’s shares closed Thursday at $12.875, up $2.125 per share in very heavy trading on the New York Stock Exchange.

Ronald A. Brierley, a New Zealand investor who controls Industrial Equity, said in a letter to Smith’s board that he wants to negotiate a price that is fair to Smith and its shareholders.

Loren Carroll, a Smith board member, said the board will meet to consider Brierley’s offer.

Smith filed for bankruptcy in 1986 and emerged from the proceedings in late 1987 as a much smaller company. A year ago, Smith reported its first operating profit since 1985, and revenue for 1988 reached $320.8 million.

In its effort to consolidate operations and save money, Smith moved its headquarters from Newport Beach to Houston and relocated its manufacturing plant from Irvine to Ponca City, Okla.

Brierley said Industrial Equity deserves much of the credit for Smith’s turnaround. Last year, Robert Sutherland, an Industrial Equity executive, was named Smith’s chairman. Brierley said Industrial Equity would retain Smith’s senior management if its offer is accepted.

He said Smith’s turnaround is complete, but a downturn in oil drilling early this year resulted in a $1.1-million first quarter loss for the company.

If successful in acquiring Smith, Brierley said his firm will continue current efforts to sell much of Smith’s operations and focus on its core business of providing drilling products and services.

States News Service contributed to this report