HOUSTON — Travis Street Partners LLC of Houston still wants to gain control of plastics compounder ICO Inc., in spite of ICO's plans to sell its oil field services business to a competitor for $165 million.
Oil field services accounted for about one-third of the $325 million sales total Houston-based ICO recorded in fiscal 2000. Selling the unit to Varco International Inc. of Orange, Calif., would help ICO pay off most of its debt and would make ICO a "pure play petrochemicals processing company with a strong balance sheet," Al Pacholder, ICO chairman and chief financial officer, said in a March 26 news release.
ICO's main businesses are grinding, toll compounding and proprietary compounding done through its Bayshore Industrial and Wedco units. The firm employs about 2,200 at 16 sites in the United States, Europe and Southeast Asia.
Travis Street's last offer for ICO was $2.65 per share, while ICO stock was trading April 3 at $1.875 per share.
Travis Street manager Timothy Gollin said he was not sure the oil field services sale would be approved by regulators, since a combined ICO/Varco would have more than an 80 percent share of the North American market for oil-related tubular inspection.
Travis Street criticized the Varco deal in a March 26 news release, saying its offer was "superior" and that Travis Street officials "don't see why this is a good deal for shareholders."
ICO officials could not be reached for comment. Varco spokesman Clay Williams declined to comment on regulatory issues but said his firm hoped to complete the ICO deal by the end of summer.
In a March 26 interview in Houston, Gollin laid out the reasons for his firm's interest in ICO and why it is fighting to capture the firm.
"The fundamental decision here is if shareholders want us to give them $2.65 per share for the company, or if they want to own a plastics company owned by the Pacholders," he said.
Travis Street officials have been outspoken in their criticism of Al Pacholder, as well as his wife Sylvia and the couple's son, daughter and son-in-law, all of whom work for ICO. Travis Street has claimed the Pacholders have awarded themselves excessive "golden parachute" compensation packages and have questioned expenses surrounding residential properties ICO owns and leases in England.
Since February, the two sides have dueled via news releases, with ICO at one point accusing Travis Street of "an ongoing campaign of false information, innuendo and character assassination."
Gollin was recruited into Travis Street by Chris O'Sullivan, a longtime friend and business partner who was rebuked by the Pacholders last year when he offered to form a partnership with Network Oil, an oil distribution firm that he owns.
O'Sullivan, who also owns exploration and production firm O'Sullivan Oil & Gas Co., had been aware of ICO through the oil industry but had never done business with the firm.
"If you looked at a list of publicly owned oil field businesses last year, ICO was at the bottom of the list in price/earnings multiples at a time when the industry was going through good times," Gollin said.
Travis Street has proposed three candidates for election to ICO's 10-member board of directors at ICO's April 17 annual meeting. It currently controls more than 7 percent of ICO through a partnership with Kleinheinz Capital Partners of Fort Worth, Texas.
If Travis Street eventually gains control of the company, it would work to improve its operations for three to five years and then sell it, Gollin said.
"The underlying business isn't bad, it's just poorly managed," he said. "If you're in low-margin businesses like toll compounding and grinding, you need a compelling set of facts to have people bring their business to you."
One way to improve ICO would be to move the company more into proprietary compounds, Gollin said. Industry contacts have estimated that as little as 5 percent of ICO's sales currently come from proprietary products. Contacts also estimate ICO's European resin distribution business may account for almost one-third of its sales.
"ICO needs to add value to its services," Gollin added. "If you don't have special equipment and offer something special, people don't think you're special anymore."