Horsham

"The back-in-Canada chairman and CEO of Horsham, Peter Munk, was keen to buy into the oil and gas industry. He had $100 million of Barrick Investments’ money burning a hole in his pocket, and he just had to get going. After looking at countless deals in Canada and the United States, Munk and his team found the ideal candidate. Viking Petroleum, an Oklahoma producer, met all his requirements: it had producing wells; it was cash short; and it had experienced, capable management. Since none of Munk’s Horsham group knew anything about the oil and gas business, they had to buy a company run by experts who were already in place and had a great track record."

"The following are some of my specifics for urging action now, with top priority, on the Apex deal: ¢ It is not a hostile but, on the contrary, a friendly transac- tion. At this size (or even at a fraction of its size) we have always agreed that Horsham could not cope with a hostile transaction. There are not many “friendly” ones of this size out there. ° While it is a very large deal, it is yet one that can be done by “not betting the farm,” i.e. at risk is about $40 million of Horsham’s funds, which we can easily cover by selling that many shares to new investors—in the wake of the deal! ¢ — It is a deal we are buying out of the bankruptcy courts which, to my instincts, always represented best “values.” ¢ — It is a deal in which we have a strong “inside track.” | can’t think of any other transaction of this magnitude offering us this vital advantage. ¢ — It is a deal in an industry presently in its bottom cycle. Big money was always made by acquisitions at the low point of a cycle. ¢ It is a transaction that—if it works out well—by its very scope would truly transform Horsham and, as such, is surely worth the effort. ¢ — It is acquiring a “real operation” with its own cash flows from the very start, and its own assets to be geared up—if needed—later for new deals! ¢ It is a transaction in an industry in which we have a num- ber of friends to help, or join, us. (Peter Bijur, Joe Rotman, the K.I.O., the Venezuelans, etc. just to mention a few that come to mind). Owning Apex will allow us to deal and work with these groups. 245"

"Just before Christmas 1987 Tony Novelly arrived at Peter Munk’s Hazelton Avenue offices to announce that Novelly’s Apex Oil Company, his holding company for Clark Oil, was in serious trouble. Apex, based in St. Louis, was one of the largest private companies in the U.S., with 1987 revenues over US$2.5 billion. It also owned, with Clark, two refineries in the Midwest with a combined capacity of 160,000 barrels per day, and 960 gas service stations. Novelly had joined Munk’s Barrick Resources board in 1984 and was a strong investor, with more than half a million American Barrick shares in his portfolio. He told Peter Munk that Apex had just defaulted on its loans and was in receivership. Novelly pleaded with Munk to have Horsham take over Apex. He asked Munk to be one of the bidders when the bankruptcy was adjudicated for the whole Apex structure. “Because the banks need my release ... otherwise I’ll sue them,” Novelly said, “If you do it my way, you will have a very strong advantage because I won’ give the release to anybody else. In return I want a participation with you.”"

"In every person’s life there comes an opportunity which, if grasped, changes his life. Equally so in corporations; every highly successful entrepreneur has made his corporation suc- cessful by recognising and seizing that chance. I strongly feel that the Apex deal is such a chance—a unique opportunity that can change Horsham’s destiny. It will do so by moving it to a more rarefied level, allowing its future activities to be more creative and consequently much more attractive to investors, thereby putting it amongst those few corporate “movers and shakers” to whom the right size and quality of deals come automatically. In addition, it will give us a new concept to sell and, by being seen to move away from its passive holdings in Barrick, will also revive new investors’ interest and open the door to a whole range of new constituents—to whom the “Barrick gold story” is now somewhat “old hat.”"

"Chicago real estate investor Sam Zell had been assisting Novelly in negotiating with the banks holding the defaulted Clark debt. Zell kept the banks at bay, assuring them that Novelly would not wind up with control in AOC Holdings. For his part in the deal Zell negotiated the right to buy, and did buy, a 6 percent stake in Horsham for US$20 million."

"244 GOLDEN PHOENIX Instead of needing $150 million, the new Clark would require only $30 million in equity—$18 million from Horsham and $12 million from Novelly."