Putting Crown up for sale raises a very big question


THE CROWN Central Petroleum diesel and heating-oil plant in Pasadena, Texas, would cost maybe $1 billion to build today.

But the refinery is carried on Crown's books at only about $270 million. And oil-patch brokers say they'd be lucky to get $100 million for it on the open market. What's the Crown Central facility really worth?

It's not just a case study for an MBA class. The answer is relevant to a year-old shareholder lawsuit against Crown as well as the future of one of America's great industrial fortunes.

The Pasadena plant and the rest of Crown are being put up for sale by the Rosenberg family, the most visible heirs of a very large chunk of Amoco money that was bred in Baltimore in the 20th century and largely remains here.

Lacking oil wells, holding expensive debt, squeezed by multinationals and navigating an especially tough petroleum market, Crown decided to turn itself into cash. If a deal goes through, the scions of Amoco co-founder Louis Blaustein would cease to be major oil operators, although in recent years they still owned much BP Amoco stock.

Crown hasn't been profitable since 1997, but it produces a decent amount of cash, owns efficient, expandable refineries and might actually make money again some day. Besides owning the medium-size Pasadena plant, on a Houston shipping channel, Crown owns a smaller refinery in Tyler, Texas, that makes diesel and jet fuel and has a more or less permanent customer in the form of nearby Barksdale Air Force Base. Crown also owns about 200 gas stations and holds the lease for about 100 more in Maryland, Virginia and elsewhere in the region.

The idea is to sell Crown, dock, truck and barrel, pay debts and put what's left into new investments for Rosemore Inc., the holding company controlled by Henry A. Rosenberg Jr. and his sisters, Ruth R. Marder and Judith R. Hoffberger. The three, descendants of Louis Blaustein, account for only a portion of the Blaustein fortune, estimated by various sources to be worth more than $1 billion.

The deal is of considerable interest not just to the Rosenbergs but also to former Crown shareholders who claim Rosemore paid too little when it took Crown private two years ago. Their lawsuit was rejected by a lower court but is being appealed. A fat price could bolster their argument; a fire sale would not.

"This is not a fire sale," says John E. Wheeler Jr., Crown's chief financial officer.

Crown is in no hurry to sell, says Wheeler, who declined to spill recent financial results of the now-private firm. The Gulf Coast "crack spread" -- essentially the gross profit markup for refiners such as Crown -- has popped from less than $2 a barrel a year ago to over $7 now, he said. If it holds, it would make the refineries more attractive. Cold weather across the Northern Hemisphere has also helped profits, and in a minimal mark of solvency, Crown made the semiannual $6.7 million interest payment on its $125 million, 10.875 percent bond issue this month.

On the other hand, those bonds, due in 2005, are commanding only about 80 cents on the dollar in the debt markets, according to junk bond dealer Debt Traders, which doesn't bespeak confidence. Crown has a history of losses, and many other refineries are competing for buyers' attention.

Crown's refineries have been for sale since 2001, with plenty of lookers and no takers.

"We're talking to 'em now," says Al Gonzalez, a small refiner who says he wants Crown's Tyler plant. "If we can come to terms, we're ready to go. We feel like we've pretty well got the money lined up."

That's what they all say.

"There's a handful of parties that are interested in Tyler, and at Pasadena, there's less than a handful," says Malcolm M. Turner, a Dallas-based refinery broker who was hawking the plants last year. "And without exception, these candidates don't have any money."

Even so, he expects Crown's properties to sell at some price. He figures Crown could get $100 million for Pasadena and $50 million for Tyler, maybe half what the places were worth a few years ago and in the range of what Crown's investment banker, CS First Boston, said they were worth at the time of the buyout. Crown's gas stations and convenience stores, Turner estimates, could sell for $150 million or so.

So that's $300 million in proceeds. Take away $130 million in Crown debt (there's another $85 million or so in buyout debt on Rosemore's books) and you're left with a princely sum, but perhaps not the enormous windfall predicted by the suing shareholders.

But if prospects are so bad, why is Crown selling? Is it the hazard of refinancing the bonds in two years? Or something else?

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