Agrees to Give Him Control of Board : NL Gives In to Suitor Simmons
NL Industries, formally abandoning a two-month effort to defeat a takeover by Dallas investor Harold C. Simmons, said Thursday that it has agreed to give Simmons control of its board.
Simmons took effective control of the chemicals and energy services concern last week when he raised his stake to 51.1% of NL’s 60 million common shares outstanding.
Under the agreement, NL’s board will be cut to nine members from 13 and will include Simmons and four of his associates.
However, Theodore C. Rogers will remain NL’s chairman and chief executive. The agreement also calls for NL’s other management to remain in place and for its existing employee-benefit programs to continue in effect.
After Simmons purchased control, he met with Rogers on Tuesday to devise an agreement in principle on how they should proceed, according to a source who attended the meeting but who agreed to discuss it on the condition that he not be identified.
Despite NL’s earlier fierce efforts to remain independent, “it was a very friendly and cooperative meeting,” the source said.
Advisers to NL and Simmons spent all of Tuesday night and most of Wednesday drawing up a formal agreement, which was approved by NL’s board late Wednesday, the source said.
The most pressing matter for NL and Simmons is what to do with NL’s chemicals business.
While NL was trying to thwart Simmons, the company proposed spinning off its chemicals group to stockholders. The chemicals business has remained profitable while NL’s energy group has struggled amid the slump in the oil and gas industries.
To expedite the spinoff, NL’s holders were issued depositary receipts representing their equity interest in NL Chemicals. The receipts, which now trade separately from NL’s common stock, were to be exchanged later for common stock in NL Chemicals after that stock was registered with the Securities and Exchange Commission.
However, completion of the spinoff is in limbo because Simmons has said it might result in a tax liability of as much as $250 million.
NL and Simmons said they agreed to complete the spinoff as soon as they were confident that it could be done tax-free, but they said that is not likely to occur this year.
In the meantime, NL and Simmons said that they would explore the possibility of selling the chemicals group and that they believe the sale could be structured in such a way as to avoid a similar big tax bite.
The prospect that NL Chemicals might be sold helped send the price of its depositary receipts higher in heavy trading. The receipts, trading as preferred stock, climbed 50 cents a share to $11.50 in New York Stock Exchange composite trading. NL’s common stock, adjusted for the proposed spinoff, rose 12 1/2 cents a share to $4.50.
NL and Simmons also said that under their agreement, any proposal by Simmons to acquire the rest of NL prior to May, 1991, must be approved by a majority of NL’s directors who are not affiliated with Simmons.
Simmons and NL also said they would not pursue NL’s appeal of a lower court ruling that invalidated NL’s “poison pill” anti-takeover provision.
