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Dynamic Duo kicks up fuss Plains rejects then accepts new offer; Raymond, Flores at center of storm Ray Tyson Petroleum News Houston Correspondent
The Dynamic Duo of John Raymond and James Flores has been hard at work these past months, leading the charge on the friendly takeover of one publicly traded company and kicking up a storm with investors over the attempted takeover of another one. In fact, Raymond and Flores wear so many hats it’s tough keeping track of their exploits.
Raymond, the son of ExxonMobil Chairman Lee Raymond, serves as president and chief operating officer of independent producer Plains Exploration & Production Co. and president and chief executive officer of Plains Resources, while at the same time sitting on the board of Plains All American Pipeline.
Flores is chairman and chief executive officer of Plains E&P and chairman of Plains Resources. For these services, Flores reportedly earns separate paychecks totaling nearly $2 million a year. Raymond is listed as earning $1.18 million a year in his role at Plains Resources, but it was unclear just what he makes as a top executive at Plains E&P and as a board member of Plains All American Pipeline. Plains E&P spun off in 2002 In late 2002, Plains E&P was spun off Plains Resources into a separately traded company. Like its sister, Plains Resources is an independent energy company engaged in the acquisition, development and exploitation of oil and natural gas. The company also holds an ownership position in Plains All American Pipeline, which has interests in U.S. midstream activities, gathering, transportation, terminalling and storage of oil.
Raymond and Flores have a common thread dating back to at least Ocean Energy, a large exploration and production independent that ultimately was taken over by an even larger independent, Oklahoma’s Devon Energy. Flores began his career in 1982 as chairman and chief executive officer of Flores & Rucks, which later was renamed Ocean Energy, a company that established a strong position in the Gulf of Mexico. Raymond was Ocean’s vice president of corporate development from April 1998 to January 2000.
In recent months, Raymond and Flores have been squarely at the center of merger activity that included Plains E&P’s friendly takeover of fellow independent Nuevo Energy, announced Feb. 12, in a stock deal valued at $945 million. Industry analysts seemed to have welcomed that transaction, in part because of cost savings and the close proximity of Plains-Nuevo exploration and production acreage. Both companies maintain strong positions both onshore and offshore California, as well as in Louisiana. Plains Resources’ deal has ruffled feathers It’s the other deal involving Plains Resources that ruffled the feathers of investors and put both management and the board in an embarrassing position, with a lot of explaining still to do.
Raymond, Flores and another key player in the proposed takeover of Plains Resources, Microsoft co-founder and billionaire Paul Allen, teamed up in a tumultuous effort to buy the outstanding stock of Plains Resources last November for the sum of $14.25 per share and then transform Plains into a private company. Their first attempt failed after a special committee appointed by the board reviewed the proposal with the help of outside advisors and rejected it with little explanation. The committee said only that the offer “was inadequate and not in the best interests of Plains Resources’ shareholders.”
Internet chat rooms had come alive with investors furious with the initial proposal if, for no other reason, the share value of Plains Resources had exceeded the offer during the period of the committee review.
Meanwhile, a revised offer of $16.75 per share was presented to the special committee and that seemingly clinched the deal. Plains Resources announced Feb 19 that “after careful consideration” it had entered into “a definitive cash merger agreement” with the Vulcan Group, an affiliate of Vulcan Capital, the investment arm of Allen’s Vulcan Inc.
In an apparent effort to appease shareholders, Plains Resources specifically mentioned in its press release announcing the deal that Raymond and Flores, as players in the Vulcan Group, could participate in the transaction but could not receive $16.75 for each of their shares of Plains Resources, as could other shareholders of the company. Investors still uncomfortable, even at $16.75 per share Still, investors were uncomfortable with the deal. For one, the board failed to mention that while it was open to proposals from other potential buyers, it actually had received one from a group led by Pershing Square L.P and Leucadia National Corp. Pershing is a recently formed investment partnership managed by William Ackman, a formal principal in the now-defunct hedge fund Gotham Partners.
That revelation led to yet another press release, issued just days after the merger agreement with Vulcan was announced, in which Plains Resources acknowledged Pershing as a suitor. However, Plains said it rejected Pershing’s offer because of the “highly conditional nature of the proposal.”
Pershing offered $3 per share in cash plus new securities with an uncertain trading value to be issued by Plains Resources itself. Complexities of the proposal, including unknown tax consequences, also weighed into the board’s decision, Plains said. Ultimately, shareholders will have to approve the deal with Vulcan.
Microsoft’s Allen and his deep pockets have no doubt added intrigue to the Plains deal with Vulcan. Over the years, Allen’s holdings have included stakes in DreamWorks SKG, Ticketmaster, Starwave, c/net, and others. One reporter characterized Allen as an “everywhere man” torn between his Microsoft duties and his personal ambitions as an investor.
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