Crown Central Petroleum Corp. ended its nearly seven-decade run as a public company yesterday after shareholders overwhelmingly approved a bid by the Baltimore-based refiner's controlling family to take it private.
About 88 percent of the votes were cast in favor of the merger between Crown and Rosemore Inc., a holding company owned by the Rosenberg family that held about 45 percent of the votes. Five percent voted no or abstained, and 7 percent did not respond.
"It's been a long two years here trying to get to where we are today," said Crown Chairman, Chief Executive Officer and President Henry A. Rosenberg Jr., who plans to announce his retirement within the next six weeks. "It's been interesting for a lot of us in many ways, and this marks a new chapter in the company history."
That history in Baltimore goes back to 1910, when Rosenberg's maternal grandfather, Louis Blaustein, founded American Oil Co., or Amoco. The Lithuanian immigrant and his son, Jacob, left an indelible mark on the oil business by inventing the drive-through filling station and a visible gas meter, so people could see how much gasoline they were buying.
The Blausteins lost control of Amoco after Standard Oil of Indiana acquired 50 percent of the company in 1925, but the family did become one of the largest shareholders in what is now BP Amoco.
The family got into refining five years later when a company led by Louis Blaustein bought a 48 percent stake in Crown, which had been started in 1917 by Texas wildcatters. The company went public in 1935.
Rosenberg will continue to be chairman of both Crown and Rosemore after he retires, turning over the positions of Crown CEO and president to his son, Frank B. Rosenberg, 42. Rosenberg's other son, Edward "Ned" Rosenberg, 45, is CEO of Rosemore.
If his grandfather could remark on yesterday's vote, he would probably say, "Why did we get into the refining business in the first place?" Rosenberg, 71, said with a laugh yesterday. "He was talked into it because he felt he needed a good source of supply."
The company, which has two refineries in Texas, suffered $139 million in losses during the 1990s after a decade of mostly good years in the 1980s, when the company earned $181 million. Crown's B shares sagged from more than $28 a decade ago to as low as $4.63 in December 1999.
Crown was also beleaguered by a five-year battle with its union at the Pasadena, Texas, refinery. Crown locked out the workers in February 1996 after contract negotiations broke down and the union responded by instigating a boycott of the company's stations. The dispute was settled in January.
Margins have improved recently. In the first 11 months of 2000, Crown narrowed its loss to $2.5 million, from $29 million in the first 11 months of 1999.
Despite the overwhelming vote to accept the Rosemore offer, several stockholders said Crown's improving financial picture indicated that the $10.50 a share was inadequate.
Shareholder Francis Hogle, who is also an investment adviser, said that if the Rosenbergs are willing to pay $82 million to acquire all the shares they don't already own, they must think it's a worthwhile investment.
"I think the refining business will become a good business," he said. "I'm not opposed to Mr. Rosenberg; I'd like to be on the same side of the table as him."
James J. Hayes, who bought 200 Class A shares of Crown in 1996 for $18 each, said he thinks the Rosenbergs will eventually sell Crown's assets - and keep the profits for themselves instead of sharing them with investors.
"If you look at the trends in the refining industry, it's a consolidating industry," he said. "I think minority shareholders would feel like they're being cheated."
Hayes made a motion at the meeting that the vote be postponed and the proxy revised to show that refining margins are improving, but Crown's proxy committee voted it down.
Although Crown officials won't discuss specific plans for the company, the company has indicated in federal filings that it may, indeed, sell its refineries and focus solely on its 329 gasoline stations. One of the main concerns about staying in refining is that new environmental regulations require Crown to spend at least $25 million in the next several years to begin producing lower-sulfur gasoline.
Rosenberg maintained that the $10.50 paid to investors for their shares is fair.
"Absolutely. The stock was at $7 or $8 when we first started" the merger process, he said. "You can delay and delay and delay and never get something done."
Rosemore initially proposed paying stockholders $8.35 a share but increased that to $9.50 as part of a bidding war with Apex Oil Co. of St. Louis. Shareholders rejected that offer in August because Apex was offering $1 a share more. The two companies later reached a deal under which Apex, which controlled 13.6 percent of the votes, agreed to support the Rosemore merger, and Crown will pay Apex an additional $1.75 million for the cost of its attempted takeover.
Aside from his stature as head of a Fortune 1000 company, Rosenberg is well known in Baltimore for donating millions of dollars to various causes, including the Boy Scouts of America and the Kennedy Krieger Institute.
"We will continue to be very public-minded as a company," he said yesterday.
"Hopefully, people will consider us good neighbors and a good community participant and, of course, buy our product."