Prudential Gets Higher Bid for Partnerships : Investors: Texas-based Parker & Parsley would pay $557 million, substantially more than the hostile offer from Tulsa oilman George Kaiser.
NEW YORK — Prudential Securities said Texas-based Parker & Parsley Petroleum reached a “definitive†agreement Monday to pay $557 million for a mammoth series of oil and gas limited partnerships that Prudential had aggressively sold to small investors.
Of that amount, $448.3 million would go to the investors--many of them retirees--who poured $1.4 billion into partnerships that Prudential touted as safe alternatives to bank CDs.
But the agreement--which is subject to a number of conditions--raises the likelihood that investors will get substantially more for their losses than the less than $30 million in cash Prudential offered to settle a class-action lawsuit.
The partnerships, known as the Energy Income Funds, were heavily sold to 137,000 investors between 1983 and 1991. They are at the center of an intense legal battle in which investors have alleged fraud by Prudential and the Louisiana firm that managed the partnerships, Graham Resources.
Both Prudential and Graham have denied any wrongdoing.
The Parker & Parsley tender offer, which has Prudential’s approval, is substantially larger than a pending hostile tender offer by Tulsa oilman George B. Kaiser. Kaiser is offering $283 million for 30 of the 35 partnerships; his spokeswoman said Monday that the offer remains in effect while Kaiser’s firm studies the Parker & Parsley bid.
Prudential’s selection of Parker & Parsley caps a bidding process it began after a federal judge in New Orleans effectively derailed the brokerage’s proposed class-action settlement, stating in February that he had “serious reservations†about its fairness.
The Parker & Parsley offer hinges on most of the limited partners tendering their shares. Prudential said the tender offer would not affect the legal rights of investors who have lawsuits pending. That litigation is expected to continue, and Prudential said it is reconsidering its earlier settlement offer.
The terms of the agreement seem especially favorable to Graham. The Covington, La., firm has been accused of mismanagement and of charging excessive fees to the partnerships. And its securities unit has been expelled by the National Assn. of Securities Dealers, in part for allegedly false representations made to Prudential brokers and customers.
One condition of the Parker & Parsley agreement is that Prudential buy Graham for an amount that has yet to be disclosed. Lawyers said that provision means Prudential essentially has agreed to assume Graham’s liabilities from numerous pending investor lawsuits--an amount some investors’ lawyers estimate at well over $100 million.
Prudential spokesman William J. Ahearn said Monday that Prudential will purchase Graham “to facilitate the (Parker & Parsley) tender offers.†He declined to elaborate.
As general partners, Graham and Prudential would divide an $18-million payment from Parker & Parsley. Graham would also collect $14 million in operating expenses for this year and additional money for severance pay to cover lower-level Graham employees who are being laid off.
Parker and Parsley, meanwhile, would assume $22 million in partnership debt. The $557-million purchase price includes $40 million already distributed to investors in partnership payouts this year.
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