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Fear Of Deal Unraveling Drives Pennwalt Stock Down

July 21, 1989

PHILADELPHIA (AP) _ Fear that Societe Nationale Elf Acquitaine’s offer to buy Pennwalt Corp. for $1.05 billion might unravel drove Pennwalt’s stock down $7 a share to $120.50 Thursday.

Elf Acquitaine, a French government-controlled energy and chemical company, said late Wednesday it had extended its $132-per-share offer for Pennwalt, a Philadelphia-based chemical company, until Aug. 1 under pressure from the Federal Trade Commission.

The FTC, expressing apparent antitrust worries, had threatened to seek a preliminary injunction to block the deal if Elf did not extend its offer, the company said.

″We felt we had no choice but to agree to extend,″ said Lowell Williams, an Elf spokesman at the company’s U.S. headquarters in Stamford, Conn.

The FTC said it was concerned about two chemicals both companies produced. The companies and analysts said the government probably was fearful the deal would give Elf too much control of the market for the chemicals.

″I think people are getting nervous the deal is going to get stopped,″ said Jeffrey Cianci, analyst for Bear, Stearns & Co. in New York. ″My gut feeling is the deal will get done in some modified form.″

Christopher Willis, an analyst with Brown Brothers Harriman & Co. in New York, also said he doubts the deal will fall through.

″It’s in their (Elf’s) hand right now. All they have to do is divest a couple of small businesses,″ he said, referring to Elf’s production of the two chemicals, polyvinylidene fluoride and its precursor, vinylidene fluoride.

Polyvinylidene, a plastic resin Pennwalt sells under the brand name Kynar, is used to coat electrical wires and to line pipes in chemical plants and as a coating in buildings. Elf makes some products similar to Kynar. Kynar is one of Pennwalt’s major products, but the company would not release sales figures. It is made at plants in Thorofare, N.J., and Calvert City, Ky.

Pennwalt management accepted the offer from Elf Acquitaine in March. The company, whose majority owner is the French government, outbid Centaur Partners, a New York investment group that Pennwalt had spurned.

Also Thursday, Pennwalt announced its second quarter earnings were more than double the earnings produced during the same period last year by divisions that were not sold during the fight with Centaur.

Earnings from continuing operations were $20.66 million, or $2.57 per share, on sales of $148.67 million for the second three months of the year. During last year’s second quarter, the company, minus the pharmaceutical and industrial equipment divisions that have since been sold, posted earnings of $10.18 million, or 80 cents per share, on sales of $130.82 million.

Sue S. Brown, a Pennwalt spokeswoman, said she could not comment on the earnings report or offer an explanation for the increase in profits. While fighting off Centaur’s takeover bid, Pennwalt bought back a large chunk of outstanding shares, partially explaining the increase in earnings per share.

The discontinued operations represented $2.57 million of last year’s second-quarter earnings.

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