Magnate Targets Southland Road Building Firm : Merger: Montana millionaire’s deal for Kasler Corp. would give him access to a public company through which he could liquefy assets.

A Montana construction and mining magnate proposed Monday joining his operations with those of Kasler Corp., a Highland, Calif.-based firm that is one of the state’s largest road builders.

Dennis R. Washington, a 58-year-old Missoula entrepreneur whose fortune is estimated at $600 million by Forbes magazine, is offering a deal that would leave Kasler shareholders with between 31% and 35% of the newly combined firm. He would own the rest.

The merger also would give Washington something Wall Street denied him last year: a publicly traded company through which he could raise money and liquefy his substantial private assets.

Washington’s attempt to take his firm public last spring failed when demand for new stocks ebbed.

Though his operations, Washington Contractors Group, are smaller than Kasler’s in revenue ($134 million versus $162 million in 1992, respectively), they were vastly more profitable, earning $13.6 million last year to Kasler’s $6.5 million.

Though he declined comment Monday, Washington’s argument for retaining two-thirds ownership of the new firm is largely based on his firm’s greater profitability, cash flow and order backlog, according to his letter to Kasler.

Kasler officials wouldn’t comment on the offer, saying they needed time to study it. The firm, formed in 1947, has built 205 major roadways, mostly in California. Among its current projects is the five-level interchange that will connect the San Diego Freeway with the new Century Freeway.

But Kasler’s business has waned over the past year. Earnings per share, 65 cents in the year ended last Oct. 31, are expected to drop to about 50 cents this year.

The firm’s project backlog has fallen to $120 million from $258 million in 1991 because Kasler has been unwilling to low-ball bids in the increasingly cutthroat road construction business.

Though highway spending is expected to rise sharply through the late 1990s, the business has lately become a dogfight among hungry construction firms.

Washington’s business, in contrast, is primarily in such higher-margin fields as earthmoving and mining. He argues that merging the two companies would bring complementary strengths to the new firm and create a bigger player with more muscle in the competitive construction field.

Monday, Kasler stock closed at $10.75 on the New York Stock Exchange, down 25 cents on the day. News of Washington’s offer came after the market closed.

Washington’s courtship of Kasler began in January, when he said he had accumulated more than 5% of the stock. He now owns 8.3%.

With Washington already a major holder, and with Kasler’s prospects unexciting in the near term, analysts say Kasler may be hard-pressed to refuse the deal.

But it is unclear what the merger would be worth to Kasler shareholders. Their shares would become shares in the newly combined firm, but their net gain or loss would depend on how Wall Street would value the new firm.