Gencorp Sues Shearson Over Buyout Bid
Gencorp filed a lawsuit late Thursday charging that investment banker Shearson Lehman Bros. traded on insider information to help a partnership that is pursuing a hostile takeover of the Akron, Ohio, conglomerate.
According to the suit, Shearson was serving as Gencorp’s investment banker and had access to the company’s confidential business strategy and financial records, when it began advising General Partners, the investors that launched a $2.2-billion takeover bid in mid-March.
The suit, filed in federal district court in Columbus, Ohio, contends that Shearson not only failed to tell Gencorp executives of its other client, but used information gathered from the company to help General Partners launch the take over.
Representatives of Shearson and General Partners could not be reached late Thursday for comment. An edited version of the suit was made public Thursday by Gencorp. Company lawyers said some of the information had been excised because it was considered sensitive to Gencorp’s takeover defense.
The suit asks the court to halt the pending takeover until a full disclosure is made, to prevent Shearson from acting as a financial adviser in the proposed takeover and to require General Partners to give up any profits it might realize from the sale of stock it holds in Gencorp.
In the court papers, Gencorp charges that from June, 1986, through mid-December, 1986, Shearson advised the company on a variety of strategies, several of which would have helped the company fend off an unwanted takeover.
Among those were a proposed leveraged buyout of the company’s General Tire subsidiary in June, 1986, for which Shearson provided the financial analysis. Following the analysis, the proposal was abandoned.
The suit says that Shearson advisers included Linda Bornheutter, an associate in the mergers and acquisitions department.
As a result of having its personnel participate in Gencorp’s evaluations, the suit charges, Shearson was able to use “non-public, confidential and inside information” to help General Partners launch its hostile takeover on March 18.
