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Frates Group Fails to Oust Board at Kaiser Aluminum

Times Staff Writer

An attempt by an investor group to oust the board of Kaiser Aluminum & Chemical apparently has failed, both sides said Tuesday.

But the group, led by Oklahoma investor J. A. Frates, said it hasn’t abandoned its $28-per-share offer to buy the Oakland company and is trying to decide what its next step will be.

Official results of Tuesday’s annual meeting at which shareholders selected a board of directors aren’t scheduled to be released until May 13.

But a jubilant Cornell C. Maier, chairman of Kaiser Aluminum, told nearly 1,000 shareholders and employees gathered at company headquarters: “We beat the opposition. . . . On May 13th, I’ll be able to say to you we beat the hell out of them.”

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Group Weighing Options

Frates group member Leonard Conway acknowledged before the meeting that the investors didn’t have the votes to remove the 12 incumbent Kaiser directors and replace them with their own slate of 11.

“I don’t know what the count is, (but) I think it’s clear that they have won,” Conway said. Frates did not attend the annual meeting.

Conway said the group, which owns or controls about 21.5% of Kaiser Aluminum’s 44.4 million shares outstanding, is “examining our alternatives.” Those options include buying more stock, selling its holdings, taking on a partner or “seeking other ways to influence the direction of the company,” he said.

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If the group had sold its Kaiser stock at Monday’s $21-per-share closing price, the group would have made a roughly $25-million profit on its more than $115-million investment, Conway said.

Tuesday’s meeting is the second defeat for the Frates group in its efforts to oust the Kaiser board.

The group has said it wants to remove the board, restructure Kaiser Aluminum by selling assets and take the company private by offering a $28 package--$10 in cash and $18 in securities--for each Kaiser share.

Conway said the investor group lost the vote because “people are concerned, very frankly, about our ability to close this transaction at this price.” Also, the uncertainly of removing the board before executing the takeover worried some shareholders, he said. “The process is one of uncertainty, and these holders don’t like uncertainty.”

Standing Ovation

Kaiser Aluminum’s board rejected the offer, saying that it was not the time to sell the company because it is poised for a turnaround.

Maier said during the meeting that the Frates proposal is a “non-offer” because of conditions placed on the bid. But Conway responded that the conditions “are the normal contingencies in a transaction of this nature.”

Maier, who was greeted with a standing ovation when he entered the meeting room with the other directors, told shareholders that the company would be profitable in 1986, Kaiser’s 40th year in the aluminum business. “We wouldn’t think of celebrating a 40th birthday any other way,” he said.

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Kaiser Aluminum, the nation’s third-largest aluminum company, rolled up $471 million in losses over the last four years. But a combination of lower energy and labor costs, higher productivity and higher aluminum prices will eliminate the red ink this year, Maier said.

Maier thanked employees and shareholders for their support during the takeover battle and recognized 160 volunteers, each wearing a red, white and blue “badge of victory,” for hours spent calling shareholders, answering telephones and “even sitting on the floor and stuffing envelopes.”


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