Onoda Gets Option on Cement Unit : A Reluctant Brierley Will Sell Holdings in CalMat to Japanese

New Zealand corporate raider Ronald A. Brierley has reluctantly ended his hostile takeover assault on CalMat, one of Los Angeles’ biggest and oldest companies, and agreed to sell his shares to Japan’s largest cement maker, spokesmen for all three parties said Wednesday.

Brierley will sell his 19% stake to Onoda Cement Co. for $41.75 a share, making the deal worth $242 million. Onoda will name two directors to CalMat’s 15-member board and received an option from CalMat to buy in two years its California Portland Cement Co. and 13 ready-mix concrete plants in the Los Angeles area.

“Overall, we were disappointed in the outcome,” said Robert G. Sutherland, executive vice president of Brierley’s La Jolla-based investment arm, Industrial Equity (Pacific) Ltd. “We are opposed to the breakup (of CalMat), but we’re unable to persuade the board to talk to us.”

Brierley had announced on March 23 that Industrial Equity would seek to buy all of CalMat’s outstanding stock for $40 a share, but never made an outright offer.

The complicated transaction would undo the 1984 merger that formed CalMat, which earned $78 million on sales of $602 million last year. Conrock, Southern California’s largest asphalt producer and sand and gravel miner, joined with California Portland Cement to form CalMat. But CalMat is now focusing on sand, gravel and asphalt because these operations produce the company’s highest profits with the least investment, Chief Financial Officer Ronald C. Hadfield said.

“I don’t think we’ve anywhere near realized the potential,” from these divisions, he said.

The result will likely increase foreign control over the U.S. cement industry, already 55% foreign-owned, said Max D. Moore of the Portland Cement Assn., a Skokie, Ill.-based industry trade group.

Onoda would become the state’s biggest cement producer if, as expected, the Yamaguchi-based firm exercises its option to buy California Portland Cement. The Mojave and Colton plants represent 21.2% of California’s cement production capacity, Moore said.

The CalMat deal follows a Feb. 5 agreement by Tokyo-based Mitsubishi Mining & Cement to purchase the 1.4-million-ton Lucerne Valley plant for $185 million from London-based Hanson PLC.

CalMat, Brierley and Onoda all do well from the deal, said James S. Schmitt, an analyst with Westcountry Financial, a regional brokerage in Somis, Calif. CalMat retains its independence, Brierley receives a high price for its holdings and Onoda acquires a huge foothold in Southern California, a construction market with a growing need for cement.

But Wednesday’s news also takes all the glamour out of CalMat’s stock, Schmitt said, by effectively eliminating the possibility of a hostile takeover by Brierley, selling the cement division fairly cheap and reaffirming a desire to sell most of the real estate division.

CalMat also put up for sale several small office parks it owns in Los Angeles, Mission Valley and Phoenix. The losers were takeover speculators and those institutions that believed CalMat’s assurances that it would find an alternative as valuable as Brierley’s offer, he said.

CalMat stock dropped $3.50 to finish at $34 on heavy New York Stock Exchange trading of 126,900 shares. The company had traded as high as $46.125 a share, as short-term investors bought the stock in hopes that Brierley’s interest would prompt a bidding war.

“The cement company is going off for a lot less than the arbitrage community and New York expected. . . . (CalMat) accomplished what they wanted, and they only have to deal with those institutions they sold down the river,” Schmitt said.

Onoda’s option will allow it to swap the 6 million shares it is acquiring in CalMat for California Portland Cement and debt worth $310 million. Or CalMat can insist on buying back the shares for $271 million, in which case Onoda will be offered California Portland Cement for $360 million in cash.

The $310-million price values the cement plants at $93 per ton of capacity, even if the ready-mix plants are thrown in for free. Other cement plants have recently been sold for $100 and up per ton of capacity, said Roy A. Grancher, a cement industry consultant in Marietta, Ga.

Hadfield said that by arranging for Onoda to hold CalMat stock for two years, the transaction will save CalMat from paying taxes on the sale. So the $310-million price is equal to a taxed price of $425 million and is a good deal, he said.