Hong Kong Firm Boosts Its Stake in Smith; Stock Rises

A Hong Kong-based firm increased its stake in Smith International to 11.2%, adding to the three-fold increase in the price of the Irvine-based oil service company’s shares since it collapsed into bankruptcy reorganization earlier this year.

In documents filed with the Securities and Exchange Commission, Industrial Equity Pacific Ltd. said it had purchased 470,700 additional Smith shares since last Thursday for $2.2 million.

That helped boost the price of Smith’s stock by 25 cents a share to $4.875 in trading on the New York Stock Exchange Wednesday. The stock’s price bottomed out at $1.25 a share in March soon after it began Chapter 11 bankruptcy proceedings.

Ronald Langley, president of North American operations for Industrial Equity Pacific, which he described as the international investment arm of New Zealand-based Brierley Investments Ltd., said “it is just an investment for us.”

He said the company is optimistic about a future resurgence of the oil service industry, which is currently in a worldwide depression. “We are just happy with the potential of the industry long-term,” he said. Langley denied speculation that IEP intends to acquire a controlling interest in Smith. He also denied that IEP is fronting for another prospective buyer.

Industrial Equity Pacific first surprised oil service industry observers last month when it filed documents with the SEC showing that since October it had bought nearly 1.3 million shares of Smith common stock for itself and five affiliated companies.

A second SEC filing last Thursday showed that IEP had bought 790,300 more Smith shares for $3.1 million, bringing its ownership to 9.1%. That was followed by IEP’s report Wednesday that it had increased its interest to 11.2%.

Herb Hart, an oil analyst with the investment firm of Rowe & Pitman, said, “When you get over 10% it looks like someone is making a run at it (buying Smith).”

Robert E. Torray, president of Robert E. Torray & Co. Inc., a Bethesda, Md., investment company that with an 18.2% stake is Smith’s largest shareholder, said he doesn’t have “the vaguest idea” of the purpose of the new IEP investment in Smith.

But he called the large investment in a bankrupt company a “strange” move for a company like IEP that has numerous pension fund investors.