Crown Central Petroleum Corp., a Baltimore institution for the past 70 years, might get out of the oil-refining business.
Financial advisers for Rosemore Inc., a holding company poised to buy all of Crown and take it private, have laid out two scenarios - one in which Rosemore would infuse more money into upgrading Crown's refineries, and one in which those refineries would be sold.
In documents filed with the Securities and Exchange Commission yesterday by Crown and Rosemore, which is owned by Crown's controlling family, the advisers estimated that the company would be significantly more valuable without the refineries. Instead, it could focus on retail gasoline sales.
Under the two operating scenarios put forth by Aegis Muse Associates LLC, Crown would be worth an expected $5.43 per share if the refining assets were kept, but if they were sold, the company would be worth $11.49 per share. A time frame was not included in the estimates."The way they looked at it, it made more sense if they looked at it as a nonrefiner," said John Wheeler, Crown's chief financial officer.
Aegis said the company can also expect to save about $9 million a year because of "headcount reductions" - which Wheeler said have already occurred - and the "replacement of existing benefits packages with lower-cost packages."
Wheeler said items such as health care and retirement benefits would be reviewed in the future.
Rosemore's president, Edward L. Rosenberg, said he had "no comment at this time," adding that the documents speak for themselves.
His father, Henry A. Rosenberg Jr., chairman of both Crown and Rosemore, did not return calls.
Crown is in the throes of a takeover battle that seemed wrapped up this month. Last month, Crown's board accepted a $9.50-per-share cash offer by Rosemore. But before shareholders could vote on the deal, St. Louis-based Apex Oil Co. Inc., which has been trying to acquire Crown for months, offered $10 per share. Crown's board is reviewing the offer.
Apex had earlier proposed merging the two companies and ousting Henry Rosenberg from his job as Crown's chairman, president and chief executive.
Rosemore owns 11 percent of Crown's Class B stock and 49 percent of the Class A stock, which has 10 times the voting power of the Class B shares. Apex holds about 15 percent of Crown's Class A shares and 3.5 percent of the B shares.
The refining business is on the verge of getting considerably more expensive. Late last year, the Environmental Protection Agency said it will require gasoline to contain significantly less sulfur by 2005 - a rule that will cost each refinery tens of millions of dollars to implement.
Under the "exit refining" sce nario laid out by Aegis, Rosemore would "avoid capital spending for low-sulfur gasoline" and "cease refining operations in 2008 when [the Pasadena, Texas, refinery] cannot meet more stringent low-sulfur diesel specifications."
Crown would then sell the refinery or operate it as a terminal or holding tank. The scenario assumes that the smaller refinery in Tyler, Texas, would be sold by 2008.
Crown, which employs 180 people in Baltimore and 2,700 nationwide, operates two refineries, 331 gasoline stations and 13 product terminals.
Its widely traded Class B shares, which averaged about $7 last year, closed unchanged yesterday at $9.
The company was founded in 1917 by Texas wildcatters and acquired by Henry A. Rosenberg's grandfather, Louis Blaustein, in 1930. Blaustein founded the American Oil Co. - now part of BP Amoco PLC - in 1910.
When Edward Rosenberg was asked in March if Rosemore would stay in the refining business if it acquired Crown, he said, "Refining is a difficult business, especially on the Gulf Coast. What the future is for oil refining - anybody's guess is as good as mine."