MCA Asks for OK of Bylaws to Fight Takeovers

MCA Inc., in a proxy statement mailed earlier this week, is asking its shareholders to approve a broad range of anti-takeover measures, including a 50% increase in the number of authorized shares and the power to issue preferred stock.

If shareholders agree to increase the number of authorized common shares to 150 million, the Los Angeles-based entertainment conglomerate would have the ability to issue twice as many shares as a corporate raider could currently buy. Only 48.8 million MCA shares were outstanding as of Jan. 31.

The Universal City-based entertainment company is also asking shareholders for the authority to issue up to 25 million shares of preferred stock and to grant the board the power to determine the terms and conditions of the issue, such as convertibility.

‘Shark Repellents’

“These are ‘shark repellents,’ pure and simple,” one entertainment industry executive said. “No defense is insurmountable, (but) they’re insulating themselves very well.”

In the proxy statement, MCA repeatedly noted that the proposed measures could deter a takeover, although it also stated that the company is unaware of “any specific effort . . . to obtain control of the company.”

Although a majority shareholder vote is required to approve bylaw changes, MCA is proposing that, in the future, a 75% vote be required to repeal the proposed amendments.

As previously reported, MCA directors voted for most of the proposed changes in a meeting last August. At the time, MCA had publicly noted its displeasure that a casino operator, Las Vegas-based Golden Nugget Inc., had amassed nearly 5% of its stock, but MCA President and Chief Operating Officer Sidney J. Sheinberg declared that the revamping of the bylaws had begun before the company learned of the casino operator’s investment. Golden Nugget subsequently sold its stake.

Among other changes, MCA proposes to eliminate the ability of shareholders to call a special meeting. A majority of stockholders currently could demand such a session.

Limit Use of Consents

MCA also proposes curbing the ability of stockholders to use written consents to force corporate action without a meeting. If a shareholder wants to initiate a drive for written consents, the record date won’t be set until 21 days following receipt of the request. Another 31 days may pass before the consents are tallied. If the consents are challenged in court, they won’t be considered effective until after the final termination of court proceedings.

In the proxy materials, MCA noted that its top five salaried officers each have a current annual salary of $500,000. The five officers are Sheinberg, Chairman and Chief Executive Lew R. Wasserman, Executive Vice President Thomas Wertheimer, and two corporate vice presidents, Irving Azoff and Frank Price.

Azoff, who is president of MCA Records and Music Group, received $400,000 in cash compensation last year and an additional $215,000 from his 25% stake in a company that participated in a joint venture with an MCA subsidiary to sell novelty items and souvenirs at the 1984 Summer Olympics. The proxy materials note that Azoff’s stake was acquired before joining MCA and was reviewed by MCA’s conflict-of-interest committee to assure arm’s length dealing.

Azoff, formerly a business manager for a number of successful recording artists, received about $70,000 in royalties from MCA subsidiaries in 1984, the company said.

The proxy also noted that Sheinberg paid $260,975 to MCA to acquire a conference and meeting room that the company had agreed to build at his residence.