Opposite tactics pursued by big holders of Las Vegas chemical company shares

David Strow

Wednesday, Jan. 19, 2000 | 10:51 a.m.

One of American Pacific Corp.'s largest shareholders has unloaded more than half of its stake in the company, seven months after it said it was trying to force a sale of the Las Vegas-based chemical company.

Meanwhile, a Milwaukee investment fund, apparently with more benign motives, has accumulated a 10 percent stake in the firm.

In a filing with the Securities and Exchange Commission, New York-based investment advisory firm Gabriel Capital said it sold 824,000 shares of stock on Jan. 4 and 5. Sold for $6.8 million, the shares represent about 10 percent of the outstanding shares of American Pacific.

Gabriel Capital had been pushing for the sale of the company, accumulating a 17.6 percent stake in the firm through last June. In its filings, Gabriel stated it "intend(s) to attempt to influence (American Pacific) to maximize shareholder value by seeking an acquisition of the (company) by a third party."

In August, American Pacific's board adopted a "poison pill" -- a measure designed to ward off attempts at a hostile takeover of the company. But American Pacific Chief Financial Officer David Keys said that measure was part of an effort to increase shareholder value, rather than a move targeted specifically at Gabriel's accumulation.

If any party accumulated 20 percent or more of the company's stock without the board's consent, the poison pill would take effect. This provision allowed shareholders to buy $48 worth of stock per warrant, which carried an exercise price of $24. The purpose of such a provision is to make a hostile takeover of a company prohibitively expensive, and to force suitors to negotiate with the board.

The company adopted the poison pill "to protect our stockholders from potentially abusive takeover tactics designed to acquire our company at an unreasonably low price," AP Chief Executive John Gibson said in a statement.

At the time, American Pacific said it was working with New York investment firm Wasserstein Perella & Co. to advise it "in connection with the board's review of strategic alternatives to maximize shareholder value."

The company has primarily focused on the repayment of debt and repurchase of stock in its efforts to increase share value, Keys said.

"The easiest way to say it is that we're keeping all of our options open at this point," Keys said. "We are pursuing a variety of roads and avenues, including acquisition strategies, merger and sales strategies. We're keeping a very open mind, looking at different alternatives."

Gabriel still retains 611,000 shares -- a 7.8 percent stake in American Pacific, making it the third-largest shareholder. It made no mention in its most recent filing that it was still trying to force a sale.

American Pacific's newest institutional investor, which has acquired 10 percent control of the company, apparently has no such motives.

In an SEC form dated Dec. 31, Milwaukee-based Artisan Investment Corp. announced it had accumulated 886,000 shares of American Pacific stock. That amount of stock would make the firm the new second-largest shareholder in the company.

The SEC only requires shareholders to register when they exceed 5 percent ownership in a company. The Artisan filing does not state when the shares were acquired, or if Artisan had held shares before, stating merely that the shares "have been acquired on behalf of investment advisory clients of Artisan Partners."

In a statement filed with the form, Artisan stated it had not acquired the shares "for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose or effect."

"My understanding is that it's a small-cap value fund," Keys said. "It hasn't said anything in its filing, other than it's a passive investor."

American Pacific's largest shareholder is the Public School Employees' Retirement System of Pennsylvania, which holds nearly 19 percent of the company's shares.

The company manufactures specialty chemical products. Its main product is used as an ingredient in rocket fuel.