By the OGJ Online Staff
HOUSTON, May 11 -- Financially-troubled Allis-Chalmers Corp., based in Brookfield, Wis., completed an agreement to merge its one operating subsidiary, a Houston-based equipment company, into OilQuip Rentals Inc. through a stock-swap, officials said Friday.
Under that agreement, Allis-Chalmers will issue 10 million shares, or 86% of its outstanding stock, to former OilQuip shareholders. In return, Allis-Chalmers will be relieved of its $66.7 million to the Pension Benefit Guaranty Corp, resulting from a lengthy reorganization process that the company underwent after filing for protection under Chapter 11 bankruptcy proceedings in June 1987.
Although its name was once closely identified with tractors and other farming equipment, Allis-Chalmers now has only one active subsidiary, Houston Dynamic Service Inc. in Houston which services and repairs primarily compressors, pumps and turbines. Last year the company reported a net loss of $189,000 or 12¢/share.
Following the merger, the new Allis-Chalmers will investigate opportunities for acquisitions in natural gas exploration and drilling, using Houston Dynamic Service as a centralized fabrication and machining facility for its operations.
Under the merger agreement, Munawar H. Hidayatallah, CEO and controlling shareholder of OilQuip, was named as the new president, CEO, and chairman of Allis-Charmers.
OilQuip, through its Mountain Compressed Air Inc. subsidiary, provides air-drilling services for natural gas exploration and production in the US. Mountain Compressed Air has outstanding warrants for the purchase of an aggregate 20% of its outstanding shares. That includes a warrant issued to Wells Fargo Energy Capital entitling the holder to acquire 13.5% of the outstanding shares.
The exchange of stock is expected to be approved at a special meeting of Allis-Chalmers shareholders in June or July, officials said. Hidayatallah said he has been granted proxies representing 70% of Allis-Chalmers common stock.
