Opinion ID: 1799426
Heading Depth: 2
Heading Rank: 4

Heading: Gulf Enters Picture.

Text: On May 13, 1963, or thereabouts, Jay Pritzker contacted Leonard Rosen of the Gulf group and told him of the availability of Brainin's large shareholdings in Fenestra and suggested that it might be a desirable deal for Gulf to purchase the Fenestra shares. Before this, Rosen was not acquainted with Fenestra. On May 16, 1963, Pritzker met with Rosen and other members of the Gulf organization and the recent financial history of Fenestra was reviewed. The offer of Pritzker to lend money to Gulf to help finance the purchase of this large block of Fenestra shares from Brainin was attractive to both Pritzker and Gulf. The parties discussed the fact that Fenestra had substantial liquid assets and that this high liquidity might be enhanced by disposing of the three building products divisions (which were the money losers) and retaining the automotive spring division which was the substantial earner for Fenestra. The possibility of a merger of Fenestra with Gulf was discussed but was advised against because of the possibility of losing Fenestra's operating loss-carry-forward tax benefits. The possibility of Fenestra lending Gulf money, with appropriate security, was also discussed. An understanding was reached that Gulf could borrow money from the Pritzker group to finance the purchase of some 290,000 shares at $21 per share which was less than book value but more than the market price. Gulf expressed a keen interest, subject to inspection of Fenestra plants and inventory. Events thereafter moved rapidly. May 22 through May 24, 1963, a member of the Pritzker group and of the Brainin group made an inspection of several Fenestra plants. On May 28th Leonard Rosen of Gulf met with Jay Pritzker and a number of financing documents were drawn up. Jay Pritzker, with Gulf approval, organized the G.A.L.C. Company as a wholly-owned subsidiary of Gulf and nominal purchaser of the Fenestra shares from Brainin. On the following day, May 29th, Jay Pritzker went from Chicago to Detroit to meet with V.W. Klein (a Fenestra attorney and a member of the board). The imminence of the sale of the Brainin shares was discussed. Matters attendant to this substantial transfer of stock ownership were also discussed, such as the election of Gulf nominees to the board, the possibility of disposing of losing divisions of Fenestra, and the possible use of excess liquid funds in specialized financing transactions, including the possibility of lending money to Gulf at the higher interest rates of finance companies, secured however by some of Gulf's land contract receivables. Several days later the information was relayed to Gulf that the management directors of Fenestra would be opposed to any loans to Gulf and that, as to the election of Gulf nominees to the board immediately, in advance of the next annual meeting of the 6 majority or management directors were agreeable to electing only 4 of Gulf nominees. Thereafter, on June 1, 1963, Jay Pritzker advised President Orren Leslie that Gulf was prepared to purchase the Brainin stock. Rosen advised Pritzker that Gulf was willing to take the transaction without getting immediate control of the board and without anticipating any accounts receivable financing between Gulf and Fenestra. On June 3d, the Gulf board met and approved the purchase of the Fenestra shares and the financing of said purchase as developed by Jay Pritzker.