St. Louis Post-Dispatch from St. Louis, Missouri • Page 18

3 DEC 17 1985 binsflEessthe ecoEOHry 7C Pec. 17, 1985 ST. LOUIS POST-DISPATCH Mid-America Theaters Being Sold a I Leonard (k Silk American Multi-Cinema which will acquire 34 screens in the deal, hopes to have 70 screens here eventually. By Barbara B. Buchholz Of the Post-Dispatch Staff Mid-America Theaters acquired by RKO Century Warner Theatres Inc.

19 months ago, is about to have a new owner again. American Multi-Cinema Inc. of Kansas City is buying RKO-Mid America Theaters Inc's 12 theaters here Friday. Those theaters have a total of 34 screens. AMC is the country's third largest movie chain.

Size is determined by the number of screens owned. Neither side in the transaction would disclose the purchase price. RKO SDOkesman Michael S. Landes that company's planned Plaza shopping center in Clayton. All of the theaters will be under Al Boos' control.

Boos Is vice president of operations for AMC's Midwest division. Eventually, Foreman said, the company will britg in a local manager. Films will be booked by Dave Hall, who works out of Kansas City. AMC currently owns and operates 170 movie locations with 905 screens in 105 cities and 27 states. In size, it trails No.

1 General Cinema of Boston and No. 2 United Artists Theater Circuit of San Francisco. AMC became the first movie chain to build theaters showing more than one movie when it constructed a twin cinema in the Ward Parkway Shopping Center in Kansas City 22 years ago, said Foreman. on Mexico Road, Crestwood on Watson Road, South City Twin on Lemay Ferry Road, Brentwood on South Brentwood Boulevard, Manchester Twin at the corner of Manchester and Woods Mill Road, Paddock Twin at Highway 367 and Parker Road and Kirkwood at South Kirkwood Road. AMC plans to modernize some of those theaters, but Foreman would not say which ones.

The two additional theaters AMC Is buying are under construction at Crestwood Plaza and the Saint Louis Galleria shopping centers. Independent of the acquisition, AMC is constructing movie theaters next to Northwest Plaza and at Interstate 70 and Zumbehl Road in St Charles. And it is negotiating with Capitol Land Co. to build a theater at RKO's first move into the Midwest. At the time of the acquisition, RKO said it had identified St.

Louis as an area offering potential for solid growth. AMC spokesman Ronald Foreman said his company, which is expanding nationwide, viewed the St. Louis market as "underscreened." Stanley H. Durwood, chairman and chief executive officer of AMC Entertainment, the holding company, added that his company's goal is to have at least 70 screens here. That would make AMC one of the leading players in the movie business here.

Currently Wehrenberg Theaters a firm based here, is the largest operator in the metropolitan area with 64 screens at 18 locations, according to John Louis, its film buyer. Of the 12 soon-to-e acquired RKO-Mid America locaUons, 10 are existing theaters: Esquire on Clayton Road, Village in Village Square Shopping Center, Woods Mill Twin on Woods Mill Road, Cave Springs Twin GAF Takes Carbide To Court What Makes The Bulls Roar Ahead While the "real" economy of productivity, production and construction is plodding along, the stock market is racing ahead, setting records. The Dow Jones Industrials has sailed over the 1,500 amid frenetic trading. Oil stocks sagged over reports that the Organization of Petroleum Exporting Countries might get into a price-cutting war with non-OPEC producers. But the general stock averages boomed, exhilarated by expectations of a continuing fall in oil prices, seen as a harbinger of continuing low inflation.

The market's excitement about oil was intensified by a Texas trial judge's decision upholding a jury's $10.53 billion verdict against Texaco Inc. for luring the Getty Oil Co. away from a merger with the Pennzoil Co. two years ago. With the meter ticking away, adding interest charges to the all-time record award, Texaco now owes an extra half-billion just since Jan.

5. This raises the total tab to $11.12 billion, enough to threaten the company with bankruptcy. THE HOT ACTIVITY in mergers and acquisitions, along with corporate buybacks of stock, is helping to push the over-all averages up by putting a lot more money into the hands of investors and, simultaneously, by reducing the availability of equities to them. Since the start of the year available equities have been reduced an estimated 13 percent, or $150 billion. The market has also been spurred by the drop in interest rates and expectations that rates will continue to decline.

Low inflation, slow economic growth and a more liberal Federal Reserve monetary policy have combined to push rates down. Yields on three-month Treasury bills, which averaged 9.58 percent last year, have dropped to 7 percent. Long-term rates, which were slower to decline, have fallen faster in recent months. The yield on corporate AAA bonds, which averaged 12.71 percent in 1984, have come down to 10.4 percent. Expectations that interest rates will not rebound upward rest largely on the belief that the Fed, with the strong support of the Treasury, will be trying to hold the dollar down and indeed to cut its value further against the Japanese yen and the West German mark in order to reduce the U.S.

trade deficit, running this year at about $150 billion. THE TREASURY DEPARTMENT and Federal Reserve also want lower rates to avoid aggravating the debt crisis of third world countries and the threat to the United States and other Western banks that have lent them $630 billion, according to the latest World Bank estimate. The plight of American farmers further increases pressure on the government to hold down interest rates and cut the overvaluation of the dollar. The peril to the financial system that would result from a collapse of the enormous burden of foreign and domestic debt has made the risks of allowing the U.S. economy to slide into recession "unacceptable," in the jargon of government officials.

But may the unacceptable have to be accepted in the coming year? Not many economists expect recession now. The consensus of 50 leading economists, just reported by Blue Chip Indicators, is that the American economy will rise 3.1 percent in 1986, up slightly from 2.5 percent this year. However, uncertainty about the outlook is reflected in the widest spread among the forecasters on record, with the highest 10 predicting a 4.3 percent gain next year and the lowest 10 an advance of only 1.7 percent. Good Catch Workers are silhouetted against the sky as a cable is lowered for the dismantling of the 368-foot tower crane at the Adam's Mark Hotel on Fourth Street in downtown St Lou is. The tower crane had been used to lift girders, steel and other heavy equipment to the top of the 910-room, $100 million hotel, which is scheduled to open In the spring.

Bid For MidCon Launched DANBURY, Conn. (AP) GAF Corp. filed suit in federal court Monday to try to topple Union Carbide defense against a $4.3 billion takeover by GAF. GAF said it had filed suit in U.S. District Court in New York against the company and its directors charging that Union Carbide's two-tiered defense was intended to entrench current management frustrate GAFs bid and confuse shareholders.

The lawsuit also seeks to overturn five-month-old conditions of Carbide's employee pension fund that would prevent an unfriendly buyer from using $500 million in surplus funds to help finance a takeover. On Monday, Carbide began imple- menting its defense, which consists of three lawsuits and a two-step "poison pill" designed to thwart GAF's bid or, at least, to make a takeover expensive. Analysts had said GAF had three likely options: raise its all-cash, $68- per-share bid; take advantage of Carbide's first-phase offer to swap 35 percent of its stock for cash and securities valued at $85 per share; or take Union Carbide to court over the poi- son pill. 1 At least for openers, GAF has cho- sen the legal route. In its lawsuit, it claims that both steps of Carbide's defense were illegal.

If GAF were to acquire 30 percent of Carbide's stock, the company would offer another 35 percent of its shareholders the $85 package, giving control of the company to GAF but at a premium. GAF would not be able to sell Carbide assets until the debt as much as $4 billion, incurred in the offering were retired. The second offer would not be open to GAF. The first step, GAF said, was illegal because it contained provisions "to frustrate GAFs tender offer." The second, the lawsuit contends, was intended "to confuse sareholders and theeby deter them from accepting the GAF offer and generally to prevent them from exercising their inde- pendent judgment." GAF called the defense a "poison- pill exchange" consisting of cash and "junk bonds of uncertain value." Southwest Stake Sold By Smurfit Jefferson Smurfit Group Ltd. has sold its 9.3 percent ownership of Southwest Forest Industries Inc.

of Phoenix, Southwest confirmed Monday. Smurfit Group, based in Dublin, Ireland, sold the bulk of its stake in a block at $10,625 a share on Friday, Southwest Forest said. The integrated forest products firm said the rest of Smurfit's 870,300 shares was sold earlier last week. The shares were apparently acquired by various institutional buyers for investment purposes, Southwest Forest said. Smurfit Group, based in Dublin, Ireland, acquired the shares in June 1984 as part of an unsuccessful take- over attempt.

In mid-November, Smurfit agreed that it would not buy any more Southwest Forest shares for at least 10 years, and that it would vote its holdings in line with the Southwest board. The agreement banning additional Smurfit Group purchases of Southwest Forest stock is still in effect said Ed Wren, Southwest Forest vice president for public affairs. Smurfit Group owns 78 percent of Jefferson Smurfit Corp. in Alton. refused to say why the New York- nasea company is selling after owning the chain for a short period.

The Mid-America acquisition represented Texaco Seeks To Avoid Bond NEW YORK (AP) Texaco Inc. has filed a federal court suit seeking to block enforcement of a Texas law that would require it to post a $12 billion bond before appealing the re cord damage award won by Pennzoil Co. A lawyer for Pennzoil contended Monday that the lawsuit was "an act of desperation," saying the nation's third largest oil company was attempting to buy time while trying to find ways of avoiding having to pay the judgment, which totals $11.1 billion with interest. In documents filed Friday with the U.S. District Court for the Southern District of New York, Texaco said that if it is forced to post a bond of $12 billion an amount approaching the company's $13.5 billion net worth the expense would "will destroy Texaco as a going concern." Thus, because Texaco would be financially unable to defend itself, its constitutional right to due process and equal protection under the law would be violated, the company maintained.

Irv. V. Terrell, an attorney with the Houston law firm of Baker Botts, which represents Pennzoil, scoffed at the argument. "We think we're going to win, because the Texaco bond statute is constitutional," he said. "Texaco has taken action in a federal situation out of desperation." "This is just a delaying action to prevent Pennzoil from collecting They're delaying because they hope that the longer they hold out, something will happen because what's happened so far is not so good," he added.

In Houston, Pennzoil spokesman Tom Powell said his company would file a reponse to the suit within 20 days. Texaco's stock fell $1.124 a sliare to $28.62 12 in composite New York Stock Exchange trading. In the lawsuit, Texaco also asked the federal court to keep Pennzoil from claiming any Texaco assets while Texaco appeals the judgment. Last month, a Houston jury ruled that Texaco had wrongly interfered with a merger agreement between Pennzoil and Getty Oil Co. and then acquired Getty istelf.

The jury awarded Pennzoil $10.53 billion in damages. Texas State Judge Solomon Casseb Jr. affirmed the award last week, added $600 million in interest, and said more interest would accumulate at the rate of 10 percent annually. Casseb also temporarily waived the requirement that Texaco post the $12 billion after the two companies agreed that Texaco could continue operating for up to 90 days without paying the bond. Texaco also agreed not to file for reorganization under Chapter 11 of the U.S.

Bankruptcy Code, while Pennzoil agreed not to attach any liens to Texaco property. In a statement released Monday at Texaco's headquarters in White Plains, N.Y., the company stressed that the lawsuit was not an attempt to interfere with the "Texas State District Court in Houston, or any Texas official or the Texas judicial proceeding." The lawsuit "is designed to supplement and clarify" Casseb's order "restraining Pennzoil from taking any action by (any) process that would give Pennzoil a priority or preference as a creditor on any Texaco property," the statement said. It said Casseb "appropriately sought to maintain the status quo while he had the proceeding before him, but his order does not provide adequate protection for Texaco during the full appeal process." Although Texaco attempted to negotiate that protection with Pennzoil, those efforts "have not been successful," the statement added. Texaco officials were worried because Casseb's restrictions on Pennzoil would cease to exist if he lost jurisdiction over the case, or if his order was "modified or vacated," said John B. O'Mahoney, a spokesman for Texaco.

Should that happen, Pennzoil would be free to attach liens on Texaco assets "and cause Immediate and irreparable harm to Texaco," he said. "Meanwhile, the uncertainty threatens Texaco's ability to obtain financing to run and preserve its business." Last week, concern over the case's outcome led both Standard Poor's Corp. and Moody's Investor Services, the nation's two leading credit rating firms, to drop their Texaco credit ratings sharply downward. NEW YORK (AP) Wagner Brown and Freeport-McMoRan Inc. on Monday jointly launched a $2.6 billion attempt to acquire MidCon Corp.

Besides the $62.50 a share cash offer for Midcon's common stock outstanding, the partnership also wants to purchase all outstanding MidCon IO54 percent subordinated convertible debentures due 2009 for $1,488.10 cash for each $1,000 face amount. After the tender offer, Wagner Brown and Freeport united as WB Partners, proposed a merger In which the remaining MidCon stock would be exchanged for cash, an amount that they expect would also be $62.50 a share. The proposed takeover would have Operating Rate Up At Nation's Factories an approximate value of $2.6 billion, WB Partners said in an announcement Patricia Wees, a spokeswoman at MidCon's headquarters in Lombard, 111., said the oil and natural gas pipeline company is studying the unsolicited bid. MidCon's holdings include Mississippi River Transmission the sole supplier of natural gas to Laclede Gas Co. MidCon last week completed the purchase of United Energy Resources based in Houston.

The cash and stock transaction valued at $1.14 billion was widely viewed as a move to shield MidCon from hostile pursuers. Wagner Brown, based in Midland, Texas, is an oil and gas concern. The small November improvement was led by a 0.2 percentage point gain in the manufacturing sector. Production in the mining Industry fell to 78.7 percent of capacity, the fifth straight decline as the oil drilling business remained depressed. Production at U.S.

utilities rose 0.2 percentage point to 83.6 percent of capacity. In other economic news Monday: Corporate directors received higher pay in 1985 than the year before, but the gain was less than those recorded in the past decade, according to a study by the Conference Board, a New York-based business group. A group of business economists predicted a modest pickup in growth with continued low inflation next year but added that a new recession is likely to begin in 1987, a downturn that will be made worse by a Calls to company officials were not returned. Freeport-McMoRan was formed in 1981 when McMoRan Oil and Gas combined with Freeport Minerals Co. Officials at the firm's headquarters in New Orleans declined to answer questions on the MidCon bid.

In their joint announcement WB Partners said they would run MidCon as a separate corporation, maintaining its name, present headquarters and operations. They said the acquisition would benefit their balance sheets. Wagner Brown and Freeport began accumulating MidCon stock earlier this year and now hold approximately 1.93 million shares, about a 4.4 percent stake, a spokesman for the partners said. Factory Operating Capacity Total Industry Percentage ot UWizatkyi 62 (Index: 1977-100) 81 80 79 NDJ FMAMJJ ASON 1964 1965 just-passed law to trim budget deficits. The Conference Board study, covering 956 major companies from a broad sample of U.S.

businesses, showed that pay for directors expanded 5 percent after a 6 percent increase in 1984. Elsewhere in Washington, the National Association of Business Economists said its latest survey of 300 of its members found that 85 percent believe the country will be in a recession by the end of 1987, while only 15 percent were optimistic enough to predict the current recovery will last into 1988 or beyond. James River was founded in 19WS and has grown to sales of $2.5 billion a year through 18 acquisitions since then. Spokesman Steve Garnett said the Richmond-based company would spend about $750 million of its own stock under a complicated formula to obtain the stock in Crown Zellerbach. Goldsmith, who owns just over 50 percent of Crown Zellerbach's 27 million outstanding shares, would receive $90 million In cash as well as taking majority ownership in the three new companies, Garnett said.

I 80.1 tn Novembw llllllil SIX OF THE 59 economists are forecasting that a recession will start next year. Many businessmen, in pn vate conversations, express concern about a weaker economy in 1986. One riddle is what federal budget policy will do to the business outlook, now that Congress has passed and the president has signed the Gramm Rudman bill calling for a balanced budget by 1991. The stock market is still taking the cheerful view that Gramm-Rudman, by cutting the den cit, will ease the dilemma of the Federal Reserve and improve the outlook for interest rates. But uncertainty persists over what Gramm-Rudman will actually do to the deficit, given conflicts between President Ronald Reagan and Con gress on military spending, cuts in social programs and tax increases.

And some economists remain con cerned that mandated budget cuts will hit a weakened economy and help push it into recession. If the economy is weaker than the Administration has assumed next year, the budget deficit would be bigger and the necessary Gramm-Rudman cuts would be steeper. Despite such doubts, the stock mar ket remains feverishly hopeful, con vinced that lower interest rates resulting from the new mixture of easier monetary policy and tighter fiscal policy will keep the market rising and the economy expanding. The stock market boom could well go on for a while, but as another piece of Wall Street wisdom puts it the tree does not grow to the sky. CH985, Hum Yortt Time Ktewt Swvic WASHINGTON (AP) The operating rate at U.S.

factories, mines and utilities edged up slightly in November, following two consecutive declines, the Federal Reserve Board said Monday. Industry operated at 80.1 percent of capacity, an increase of 0.2 percentage point over October. The gain made up only part of the ground lost from declines of 0.5 percentage point in October and 0.3 percentage point in September. Analysts were divided over whether the small increase signaled brighter days ahead for U.S. industry.

John Albertine, an economist and president of the American Business Conference, a coalition of high-growth companies, predicted that the "yo-yo phenomenon which has plagued capacity utilization all year is coming to an end. I think we will see capacity utilization bouncing higher each month in 1986." He based this optimism on a belief that the dollar has fallen far enough that U.S. manufacturers will start to be competitive again in both domestic and foreign markets. But Jack Carlson, chief economist for the National Association of Realtors, predicted that the operating rate would decline from its current level once businesses restock-inventories, especially depleted inventories of cars. Carlson said the fact that factories were operating at 81.3 percent a year ago, a full 1.2 percentage point higher than currently, was evidence of a weak economy.

1 James River Sets Crown Acquisition Chrysler To Make Stock Repurchases DETROIT (UPI) Chrysler Corp. said Monday that it intends to buy back about 9.5 million shares of its common stock from employees participating in its Employee Stock Ownership Plan in a move that would cost it about $418 million, based on current stock prices. Chrysler also reaffirmed its program to buy back up to an additional 25 million shares of its common stock. So far, it has purchased 13.7 million shares under that program. Chrysler now has about 100 million shares of its common stock outstanding.

Completing the purchase program would require that an additional 11 million shares be purchased. RICHMOND. Va. (AP) James River Corp. would acquire majority ownership of a smaller Crown Zeller-bach and British financier Sir James Goldsmith would buy most of three businesses spun off from Crown Zellerbach in a three-way deal announced Monday.

James River would control a version of Crown Zellerbach stripped of everything but its paper operations, while Goldsmith would buy most of the stock in three companies involved in forest products, cardboard containers and office products..