The pension funds of General Electric Co. and IBM Corp. accepted a buy-out offer from American Exploration Co. to terminate their energy partnership interests in exchange for stock and cash.
Following the consolidation offer, known as a roll-up, the General Electric Pension Trust will become the largest shareholder in American Exploration, an independent oil and gas exploration company that stopped offering energy partnerships in 1990 to focus its efforts on its core exploration business.
The GE pension fund will own about 10% of the company's common stock.
American Exploration had managed direct oil and gas investment partnerships for 23 institutions. Other than IBM and GE, most of the remaining partners are insurance companies and smaller oil and gas firms.
Frank Murphy, vice president, corporate finance at American Exploration, said the company has reached agreement with all but three of the 23 institutional partners to accept cash or common stock for their interests in the eight American Production Partnership Limited Programs formed between 1983 and 1990.
He said the roll-up offer will allow the company to cut the administrative costs of the partnerships and enhance the company's oil and gas reserve base by acquiring the properties held in the partnerships.
GE accepted American Exploration's offer for common stock in the company in exchange for its partnership interest, while IBM accepted cash.
Christopher "Kit" Smith, senior vice president at GE Investment Corp., which manages the $39 billion GE pension fund, said GE accepted the equity participation because of the perceived value of American Exploration and because the company agreed to restructure the board of directors to provide investors with more influence.
GE already had one member on the board as a condition for making its initial investment in 1989.
Mr. Murphy said the board soon will be reduced from 12 members and "one or two" new members "with extensive oil and gas backgrounds" will be added. The new size of the board hasn't been determined.
"The board restructuring was needed to continue to make the stock more valuable," said Mr. Smith. "We are satisfied with the restructuring and believe it will help enhance the value of the company and the stock going forward by giving them more flexibility."
Mr. Murphy said IBM accepted a cash offer but declined to specify the amount. IBM had invested $31 million in APPL VIII in 1990. IBM officials would not comment. General Electric invested a total of $55 million in two APPL programs. Both investors had been receiving distributions from the partnerships during the ensuing years.
The APPL programs were formed to acquire producing oil and gas properties. Mr. Murphy said the partnership consolidation is expected to be completed before the end of the year. He said 11 partners accepted cash offers totaling $36 million, while nine partners accepted stock for their interests totaling about 47.8 million shares, with another 34 million shares to be issued subject to a stockholder vote.