Business

A quiet bidder sends the auction astray

RODERICK MCQUEEN WITH BUREAU REPORTS July 10 1978
Business

A quiet bidder sends the auction astray

RODERICK MCQUEEN WITH BUREAU REPORTS July 10 1978

A quiet bidder sends the auction astray

Business

Chalked on the press conference blackboard was the question: “Bob, do you want to buy any Husky shares cheap?” Sidney Robert Blair smiled but wasn’t pulling out his wallet because the man who beat out the big boys seeking to build the Canadian portion of the Alaska Highway pipeline last year had repeated his underdog role. He had all the Husky shares he needed to' send both Occidental Petroleum Corp., of Los Angeles, and Petro-Canada, the stateowned oil company, scurrying for cover after the two spent most of June in fruitless auction bidding that became failed Husky Oil Ltd. take-over attempts.

Starting quietly with holdings of less than 3 per cent at the beginning of June. Blair’s firm, the Alberta Gas Trunk Line Co. Ltd., increased its holdings to 35 per cent of Husky, most of it during two hectic days on U.S., exchanges, to own 3.8 million shares, spending $190 million before trading was halted in the final days of June.

After two days of talks in Calgary with

Husky officials, Blair, 48, president and chief executive officer of Alberta Gas Trunk (AGTL) was basking in the television lights of a press conference, positively gleeful with his success and warning off any challengers. He won’t, he says, go for 50 per cent ownership, unless someone else takes a run at him. Meanwhile, he welcomes all Canadians to participate in what he sees as AGTL’S “emotional commitment to the lessening of foreign ownership of petroleum companies in Canada.”

Smiling and smoking long dark cigarettes Blair answered questions for an hour in downtown Calgary’s Bow Valley Square auditorium, looking like the cat who swallowed the cream. The new Husky position, his own company and his leadership in Foothills Pipe Lines elevate Blair to the top echelon of the Canadian oil and gas industry. While the changes in Husky’s future won’t be known until recommendations are made by management consultants hired by AGTL, it’s a new era in the firm begun by Alberta-born Glenn E. Nielson, the 75-year-old Husky chairman, who bought Park Refining Co., at Cody, Wyoming, January 1, 1938, renaming it Husky Refining Co. Then Husky consisted of a 900-barrel-a-day refinery, an oil lease producing 400 barrels a day, and 19 employees.

Today, Husky is worth $600 million, has 2,700 employees, holds major heavy oil reserves in Saskatchewan, Alberta and the United States, 292 billion cubic feet in proven gas reserves, five refineries and 380 retail outlets.

Neither Glenn nor his 47-year-old son and president of Husky, James E. Nielson, who hold, along with Glenn’s wife, Olive, 18 per cent of Husky, were present with Blair at the news conference, but relations between the Nielsons and Blair are friendly. Blair and Jim spent the rest of the meeting employees, a visible assurance of togetherness and job security. They will be joined by the father for visits to the federal government and the governments of Alberta and Saskatchewan to discuss heavy oil development.

As Blair and the Nielsons scout for participants to develop the molasses-like heavy oil at Lloydminster at costs estimated up to $ 1 billion, they will welcome, Blair says, private sector participation and “will be highly receptive to developing such ventures with Petro-Canada and with Occidental.”

It was Petrocan, established in 1976, that began the bidding for Husky June 10 at $45 a share, $ 10 above market prices then. The necessary papers had not been prepared, but president W. H. Hopper was surprised when the Nielsons did not accept and pought Occidental (Oxy) as alternative purchaser.

Oxy offered $50 a share and was approved by the Husky board. Petro-Canada rebid >52 and Oxy topped that at $54 in a share exchange offer subject to obtaining 80 per cent of Husky’s shares and approval by the Loreign Investment Review Agency. Again, the Husky board favored the Oxy offer worth $587 million to Petrocan’s $567 million.

Waiting in the wings, however, was Robert Blair and ready and able to move on the open market where Petrocan couldn’t. According to Hopper: “Once we

had formed the intention internally to take a controlling interest in Husky, we would have been in violation of the law—on both sides of the border—if we had bought on the open market.” Because AGTL had made no such declaration it was able to move in the United States. Petrocan rescinded its proposed offer when AGTL’S holdings became known and Oxy’s potential offer was then impossible.

According to J. Pearce Bunting, Toronto Stock Exchange president, AGTL’S open market buying could not have been carried out in Canada. Since the Price-Abitibi take-over in 1974, a TSE bylaw means all shareholders have an equal opportunity to sell.

Even before Petrocan made its surprise first bid, others had been poised to swoop down on Husky, considered ripe for takeover because many observers felt it wasn’t proceeding quickly enough with development of the 1.6 million acres of leases and 16 billion barrels of heavy oil around Lloydminster, on the Alberta/Saskatchewan border. In fact, earlier in the year, AGTL turned down an approach by a Calgary-based group to head a take-over consortium.

Blair and AGTL were ready to go it alone when Petrocan offered June 10. Knocked off balance, Blair and AGTL recovered quickly and, bankrolled by a $ 170-million special line of credit from the Bank of Nova Scotia and the Bank of Montreal, went on the open market through the American Stock Exchange to gain its 35 per cent holding.

Husky, say insiders, was delighted by the development, because the Nielsons were not cheerful about a federal take-over. And behind Blair, there’s someone else who’s probably allowing himself a slight smile, too—Alberta Premier Peter Lougheed. With Petrocan or Oxy owning Husky, he would have been dealt out of any major say in the Lloydminster development. With old friend Robert Blair in the driver’s seat, Lougheed’s position is enhanced. “We’re certainly interested observers,” he said when AGTL’S position became public, “but there’s no involvement,” scuttling speculation that Alberta’s $3.4 billion Heritage Fund had a hand in the buy-up, but not ruling out future participation.

Blair and AGTL are well known for their connections with governments and government bodies and are already participating with Petrocan in the high Arctic and are 60:40 partners in Q & M Pipelines Ltd., with application to extend present natural gas pipelines east from Montreal.

The government, Ottawa sources say, may be relieved AGTL is in control now because, with Blair in the picture, private enterprise is happy, the nationalists are pleased, and Lloydminster development will likely go ahead.

But it is too soon for in-depth talk of development. Blair isjust getting used to carrying his first oil company credit card—a Husky. He notes with some pride that his share purchase probably reduced U.S. ownership of Husky from 80 per cent to about 40 per cent. A fitting occurrence, he feels, as Canada celebrates its 111th birthday. “It was nice you did this during Canada Week,” someone said to him in Calgary. “Nice of them,” he replied, “to hold Canada Week for us.” RODERICK MCQUEEN WITH BUREAU REPORTS