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Through the Brambles patch: Bell moves out as Brambles moves in on unstable Ensco.

Jack Forrest returned a reporter's telephone call shortly after finishing a round of golf last week.

His mind these days is far from Environmental Systems Co., the often-controversial, Little Rock-based hazardous waste transportation and disposal company.

Forrest was Ensco's president and chief executive officer for two years before surprising board members by announcing his resignation in July.

Since then, Forrest has been overcome with a desire to hunt and play golf.

"I've been shooting some low scores," Forrest says with pride.

He did, however, catch the news last week that Brambles USA Inc., a subsidiary of the Australian company Brambles Industries Ltd., is knocking on Ensco's door again.

"I'm not very surprised," Forrest says. "I've always thought they were a buyer."

Not just a friendly investor.

Brambles has been an Ensco suitor since March 1989 when the two companies announced a stock purchase and loan agreement. Brambles would provide about $60 million in new equity and debt capital to the company.

In doing so, Brambles became Ensco's largest shareholder. Brambles owns 3,121,200 shares of the company's total outstanding 15,859,673 shares. That's about 20 percent.

After Ensco's horrendous 1988, Brambles was viewed as the white knight. Ensco officials said the Brambles investment would allow the company to get back on track.

Instead, the Ensco-Brambles relationship has been rocky.

To wit:

* Brambles offered to buy remaining Ensco stock for $14 a share. Ensco said no.

* Brambles filed three lawsuits against Ensco. Ensco weathered the storm but lost hundreds of thousands of dollars in legal fees.

* Forrest, in a letter to stockholders, said, "It is impossible to measure the disruptive effect upon management and the company as a whole in trying to deal with a hostile suitor."

* Melvyn Bell, the company's founder and former chairman, sued Brambles, alleging failure by Brambles to disclose plans to take over Ensco.

* Brambles sold 250,000 of its shares of Ensco stock. A Brambles official said the company might sell more, it might buy some back or it might do nothing.

Now, Brambles is looking to buy Ensco.


No Comment

Forrest put it best when he once said of Brambles' intentions, "That information has been as hard to find as a kangaroo in Arkansas."

As usual, Brambles officials refuse to comment.

A spokeswoman in Chicago, the home of its North American operations, says company officials "have no comment at this time. There is no new news."

Ensco officials have taken a defensive position.

C. Randolph Warner Jr., who became Ensco's CEO less than three months ago, says the company's 14-member board, minus the three Brambles board members, has met.

"We've appointed a special committee of independent, outside directors to look at the proposal," says Warner, former CEO of Little Rock-based Fairfield Communities Inc.

An investment banking firm also has been chosen to advise Ensco.

Warner adds, "Brambles has not actually made an offer. The agreement dating back two years is that no offer would be made without the board's consent. So the board is meeting to decide if it will consent to having an offer made."

If the board gives its consent, expect Brambles to offer to buy remaining shares of Ensco stock at $16 per share.

Then, expect some dickering.

"Analysts have indicated that the worth is between $18 and $20 a share," says John Barnes of the Little Rock office of Shearson Lehman Brothers Inc. "... We'll see some continued negotiation between Brambles and Ensco."

Analysts speculate that other companies may join in the bidding. Despite the baggage of poor public perception, a hazardous waste disposal company with federally approved permits remains a hot property.

Alex Lieblong, an analyst at PaineWebber Inc.'s Little Rock office, says Brambles remains the favorite to buy Ensco -- if Ensco is indeed to be sold.

"They already own a pretty good slug," Lieblong says. "Nobody else has a foothold like they do."

Lieblong says it would make sense for a company already in the waste business to purchase Ensco.

"It would be like the Democrat and the Gazette merging," he says. "Another environmental company may pay more because they already have people in place to run things."

The Book On Brambles

Brambles' American operations include equipment services, security services and records management.

"|Brambles'~ only involvement with environmental waste disposal is with Ensco," the spokeswoman in Chicago says.

But Brambles Industries Ltd. of Australia has a large environmental waste division.

There also is a wholly owned subsidiary, Brambles International Finance, in the Netherlands.

Will Brambles indeed add Ensco to the fold?

Just months ago, that seemed highly unlikely.

"Jack Forrest resigned and soon after Brambles tendered for the stock," says one local analyst. "You come to your own conclusions."

Many believe the bad blood that developed between Brambles and Ensco would remain as long as Bell and Forrest were part of the picture.

Given that, the timing of Brambles' latest interest in purchasing Ensco stock should come as no surprise.

Forrest resigned in July.

Bell announced his resignation earlier this month.

The new upper-level management team that includes Warner and Ensco's chief financial officer, Richard Smith, has no ties to the messy Brambles dealings of the past 2 1/2 years.

Some question the qualifications of Warner, who has no experience in waste management. But the new CEO has been praised from inside the company as having had a healing effect.

"There is a lot of stability, and Randy has brought that stability |to~ the board and |to~ the factions within the board -- in other words, Brambles and the outside directors," says John Corcia, the chief operating officer who ran Ensco's day-to-day operations between Forrest's departure and Warner's arrival. "Randy has brought ... stability and understanding."

Industry insiders say Bell's resignation was merely a formality. Even Warner admits the financially ailing entrepreneur "has not been active in the day-to-day operations for a number of years."

Bye-Bye Bell

"Some analysts have used that as a positive," Barnes says of Bell's departure. "The company has been in a state of transition for three or four years. Under Forrest, |management~ got into the current game plan and seemed to be getting the company turned back around."

There is some question as to just how financially healthy Ensco is.

Under Forrest, the company turned a profit the past two fiscal years after suffering an $8 million loss in 1988.

However, third-quarter revenues this year were down 500 percent from the same quarter last year.

"The problem with Ensco is it has been unable to generate a steady flow of growing earnings," another analyst says. "It has had financial difficulties, been in and out of several businesses, had asset write-offs and all kinds of non-recurring charges.

"People get snakebit. They become skeptical."

Analyst Ellis Sloan of Little Rock's Meridian Management Co. says the stock market has been trading at 20 times earnings, which places Ensco stock at about $20 per share.

Yet the stock has been trading in the low teens.

Investor skepticism is based on Ensco's past. The management comings and goings certainly have not helped.

Since Forrest departed this summer, Ensco management has been in a state of flux.

To fill the void, the board created a three-member office of the chairman consisting of Warner, Brambles USA President David Ferguson and Bell.

Bill Bowen, retired CEO of Little Rock's First Commercial Corp., was named to the Ensco board.

Meanwhile, Corcia was the nuts-and-bolts head of the company.

Within two months, Warner was named CEO, Bell resumed his position as chairman and Ferguson remained as vice chairman.

Bowen left the board after less than two months to become Gov. Bill Clinton's chief of staff.

Then, Bell resigned.

Are things finally settled?

The recent changes have been overblown, Forrest says.

"Until I left, there had hardly been any comings and goings in the past few years," Forrest says. "The company is better positioned now than when I came on board."

Warner must now direct Ensco through the Brambles patch.

Fairfield To Ensco

A former Fort Smith real estate attorney, Warner was named Fairfield's CEO in 1973.

Fairfield filed for Chapter 11 bankruptcy last year and is still immersed in the legal battles reorganization brings.

Now, Warner, a friend of Bell's, pops up at Ensco.

Is it wise to have an attorney and former resort company head running a waste disposal company.

"I'm not an expert in the area," Warner says. "... I've had a lot of experience with the business side -- with lawyers and investors.

"In that sense, it's not a lot different."

If Ensco's board allows Brambles to make an offer and if Brambles makes the offer and if Ensco accepts, will there be other management changes?

"Brambles is a major international company with operations in Australia and Europe," Warner says. "They do not have any |environmental waste~ operational management team in the United States. I assume the |Ensco~ management team would stay the same."

The ball has landed in Ensco's court.

Despite its personnel changes and unstable history, Ensco is an attractive franchise business, analysts say.

The reasons are simple:

* Ensco has difficult-to-acquire permits allowing it to dispose of hazardous wastes.

* Hazardous wastes will not disappear.

"For the long term, I think Ensco is an excellent purchase," Lieblong says.

There is knocking at the door.
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Title Annotation:Brambles USA Inc. to acquire Environmental Systems Co. as founder Melvyn Bell resigns
Author:Webb, Kane
Publication:Arkansas Business
Date:Nov 25, 1991
Previous Article:The slump continues.
Next Article:A technical success: scientific, technical writing fuel 32-employee North Little Rock firm.

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