George Bush's Old Company Quits the Oilpatch

DALLAS _ Zapata Corp., founded by George Bush and a partner in 1953, is leaving the energy business, selling off its natural gas properties and finding other investments.

The Houston company said its decision was "based on the belief that businesses outside the energy industry may provide better opportunities." Avram Glazer, the company's chief executive, added Thursday that offering the energy businesses for sale did not imply that the company would liquidate.

The decision to sell all its businesses struck some analysts as a pleasant surprise. George Gaspar, an analyst at the Robert W. Baird investment firm in Milwaukee, praised Glazer's father, Malcolm, who is chairman of the company, saying, "He can smell a good deal."

Gaspar calculated that selling off the company's operations, subtracting debt and adding cash on hand would leave investors at least $184 million, or almost $6 a share. The largest chunk would come from selling the Energy Industries unit, which compresses natural gas for pipelines, for about $85 million to $100 million, he said.

Zapata is also disposing of its natural gas processing and gathering operations and a Bolivian natural gas investment. It has already announced an agreement to sell its fish meal and oil business _ providing feed for animals and food ingredients for humans _ for about $56 million, and plans to sell its natural gas properties in the Gulf of Mexico.

Although the company says that Bush has not been involved for three decades, Zapata stood as a reminder of the former president's journey from New England patrician to oilpatch wheeler-dealer.

Sentiment and tradition, however, have not sustained a company whose investments in drilling rigs and petroleum production went so badly awry that its shares, adjusting for reverse splits, fell from $198 during the oil boom to $1.50 in recent years.

The Glazers have sought their fortunes in ways very different from Bush's. They often buy shares in wobbling companies, trying to shake management up or out. Besides owning about 30 percent of Zapata, Malcom Glazer has also nearly completed the purchase of the Tampa Bay Buccaneers football team for $192 million.

Mark H. Frank, the company's planning manager, declined to say what other businesses Zapata might enter, but noted, "It is entirely possible that the best investment the company can make is its own stock." A stock buyback could raise investors' gains.

The sale of the natural gas operations is by no means certain, given the depressed gas market. "I don't think they're going to sell them at any price," that they are offered, said Max Holmes, who covers Zapata debt for Salomon Brothers.

The Glazers bought their Zapata stake at $4.80 to $5.20 a share more than two years ago, Gaspar said. They successfully agitated for representation on the board, the sale of underperforming investments and, finally, control of the company.

In the process, they greatly reduced debts that had brought Zapata to the brink of a bankruptcy filing, saved by a bank agreement to swap debt for stock. For the year ended last Sept. 30, Zapata lost $8.7 million on revenues of $241.2 million.

Malcolm Glazer, 66, whose wealth has been estimated at $300 million, also has large holdings of commercial real estate and junk bonds, most of the bonds bought near the market's bottom in 1991. As a shareholder, his major stakes include Specialty Equipment, which makes ice cream and frozen yogurt machines, and Gilbert/Robinson Restaurants. The targets of his other profitable corporate raids have included Harley-Davidson.

Bush sought his fortune in the ground and the seas. He and J. Hugh Liedtke founded Zapata in 1953 in Midland, Texas, by combining their companies. They chose the name after seeing the film "Viva Zapata," starring Marlon Brando.

Bush successfully pressed high-risk drilling in the Gulf of Mexico, separating his Zapata operations from Liedtke's in about 1959. Liedtke's business turned into Pennzoil Corp. of Houston, one of the nation's largest independent petroleum companies.

George Bush did well by Zapata. Investing $350,000 from his father and an uncle to start his business in 1951, he sold his Zapata stake in 1966 for $1.1 million. Two years later, as drilling in the Gulf of Mexico boomed, the shares were worth more than twice as much, but his profit was enough to finance a new career.

Copyright 1995
Provided by ProQuest Information and Learning Company. All rights Reserved.