J.M. Peters May Buy Back 86% Stake in His Firm : Negotiations: An analyst said San Jacinto Savings Assn. is being offered $10 a share for the stock it acquired in 1985 but wants $14 a share.
Breaking months of silence on the issue, J.M. Peters Co. said Thursday that its founder, chairman and namesake, James M. Peters, is interested in acquiring San Jacinto Savings Assn.’s 86% stake in the home-building company.
While company officials would not elaborate, an analyst said Peters has hired an investment banker to help secure financing for the possible buyout. Peters made $40 million selling the company to Houston-based San Jacinto in 1985.
A spokesman for the residential development company also said Peters has begun negotiating new terms for his employment contract, which runs through 1992 but which he can unilaterally cancel this year.
The analyst, who asked not to be identified, said that the buyout negotiations are centered on price, with Peters offering about $10 a share or $120 million for its 12 million shares, and San Jacinto demanding $14 a share or $168 million.
Several analysts have suggested San Jacinto would be willing to sell its stake in the company for about $12 a share.
Barbara Allen, an analyst with Kidder, Peabody & Co. in New York, said Peters might have a tough time finding financing even if he does negotiate a sale.
“The investment climate for real estate development companies isn’t all that good right now,” she said.
Brian Theriot, director of investor relations for J.M. Peters Co., said he could not comment on any of the negotiations. Neither Peters nor officials at San Jacinto Savings were available for comment.
Theriot said that San Jacinto has not divulged any plans to sell its J.M. Peters stock and has not said whether any transaction would include a tender offer for the minority shareholders’ shares.
San Jacinto, which is owned by the bankrupt Southmark Corp. of Dallas, said in August that it wanted to sell its stake in J.M. Peters Co. as part of a plan to sell all assets not directly related to the savings and loan business.
J.M. Peters Co., with $600 million in assets, is a major regional builder specializing in move-up homes that sell for $300,000 and up. The company builds predominantly in Orange, Riverside and San Diego counties and last year moved into Los Angeles and Ventura counties.
Under the pact Peters signed when he sold his company to San Jacinto Savings, he agreed to serve as J.M. Peters Co. chairman until 1992 with the option to leave on May 31 of this year if he gave notice on or before Thursday.
Thursday’s announcement said the company waived the advance notice requirement when it began discussing new employment agreement terms with Peters.
Theriot said the company has also released Peters from an agreement prohibiting him from establishing a competing company if he opts to terminate his contract in May.
Under his current employment agreement, Peters receives a $414,000 base salary for the company’s 1990 fiscal year, which ended Wednesday. In addition, he receives 2% of any pre-tax profit up to $38.5 million and 4% of anything over that.
His base salary and potential bonus would increase next year and in 1992. Peters also has options to buy 600,000 shares of J.M. Peters Co. stock at $6 a share over the next three years. If he or anyone else bought San Jacinto’s stake at $12 a share, the options would be worth $3.6 million if Peters stays with the company.
The company has not yet released its fiscal 1990 earnings statement, but Matheson said he estimates that pre-tax profit will be about $38 million--enough to earn Peters a $760,000 bonus this year.
Allen applauded Thursday’s identification of Peters as a potential purchaser of San Jacinto’s stock but said it should have been announced as soon as he began negotiating “because he is an insider.”
Allen has been critical of the silence by San Jacinto and J.M. Peters Co. on the topic of Peter’s future with the company, maintaining that it is a disservice to the minority shareholders.
She said Peters is so closely identified with the company that his ability to terminate his employment contract this year could give him a major negotiating advantage with San Jacinto and could affect the value of the minority shareholders’ stock, which closed Thursday at $8.63 a share on the American Stock Exchange.
“If they sign him to another contract, that would increase value of the company,” she said. “I suspect that part of the problem San Jacinto has run into in trying to sell its stock is that no one knows if Mr. Peters is going to stay, and he is very important to the company.”
In other words, J.M. Peters Co. stock is worth a lot less if the company comes without James Peters.
