Kaiser Settles With Dissidents, Agrees to Board Changes

The fractious battle between the management of ailing Kaiser Steel and a group of dissident preferred shareholders was settled Wednesday--the dissidents achieved a victory of sorts, but current management will stay in a more limited role.

Under the settlement, reached only hours before the two sides were set to face off in a Delaware courtroom, Kaiser Steel Chairman and Chief Executive Monty H. Rial will be replaced by Minneapolis investor Bruce Hendry, who had proposed a slate of six nominees for Kaiser’s board.

Kaiser Steel’s preferred shareholders won the right in July, 1986, to elect a majority of the company’s 11-member board of directors when the company failed to make a payment into a fund to redeem its preferred stock and could not make two dividend payments on its preferred stock.

Kaiser Steel announced in mid-December that the Hendry slate appeared to have won the board election, but the company disputed the way the votes of some large preferred shareholders were counted. A hearing had been scheduled for Wednesday in Delaware Chancery Court on Hendry’s request for a decision supporting his slate’s election.

‘Victory Not Guaranteed’

Kaiser Steel settled rather than go to court because “victory was not guaranteed (and) our approach has been that we wanted to, if we could, avoid a long and costly court battle,” said Kaiser Steel spokesman Jeffrey Desautels.

The settlement, reached after marathon negotiations that lasted through the night, is “not necessarily what we would have preferred, it’s not necessarily what Mr. Hendry would have preferred, but given the uncertainty of rolling the dice in court . . . it was obviously a better deal for both sides,” Desautels said.

Rial declined to be interviewed, and Hendry could not be reached for comment.

Under the agreement, Rial will remain as a director but will have no operational authority at Kaiser Steel, which recently moved its headquarters from Fontana, Calif., to Colorado Springs, Colo. Rial, whose Perma group of companies owns Kaiser’s common stock, had offered at the company’s November annual meeting to resign if Kaiser’s slate were elected.

Charles S. McNeil will continue as Kaiser’s president and chief operating officer. McNeil will not continue as a Kaiser director.

In addition to Hendry, two others from the dissident slate will be named to the new nine-member board. They are William R. Dimeling, president of a bank holding company and a coal company, and Lawrence Perlman, president of Control Data’s data-storage products group.

Three members of the competing Kaiser-nominated slate will also represent preferred shareholders. They are Stonie Barker Jr., a coal industry consultant; John C. Davis, a former senior vice president of the Santa Fe Railway, and James L. Marvin, a mining industry consultant.

Shareholder Representatives

Rial and two other directors will continue to represent Kaiser’s common shareholders. They are Stephen A. Girard, a former chairman and chief executive of Kaiser Steel, and Eustace H. Winn Jr., a Mississippi surgeon and businessman who is a longtime financial backer of Rial’s.

Desautels said Hendry plans to be involved in the company but does not know whether he will be active in the company’s day-to-day operations.

Kaiser Steel’s new board must now grapple with the coal and steel fabricating company’s deteriorating financial condition.

“We continue to operate largely in two markets that can charitably be described as depressed,” Desautels said. “It’s a very difficult situation. We’re still losing money.”

The company also has defaulted on most of its loans and its banks have granted extensions on those payments.

The battle for Kaiser Steel grew bitter as preferred shareholders accused Rial of arranging business deals between Kaiser and other companies controlled by Rial that were advantageous to Rial’s other companies.

Kaiser’s failure to make its dividend payments, its inability to make scheduled payments toward the retirement of its preferred stock and the plummeting value of that stock “are indications of Mr. Rial’s dismal record of performance since assuming control of Kaiser,” Hendry said in materials sent to shareholders.