SFSP Wins Big Court Victory Over Henley
A Delaware judge Friday denied Henley Group’s request for a preliminary injunction and ruled that Santa Fe Southern Pacific can issue $780 million worth of bonds to its 100,000 shareholders.
The ruling clears an important obstacle from SFSP’s path in its attempt to prevent a takeover by Henley, a diversified conglomerate headquartered in La Jolla. Its major interests are in manufacturing, mining and financial services.
The bonds, one of which will be issued for each outstanding share of SFSP stock, are valued at $5 and will pay 16% interest. A spokesman for Chicago-based SFSP--a railroad, real estate and energy holding company--said later Friday that it would begin mailing the certificates to holders of its 156 million outstanding shares immediately.
Payout Held Up
In an attempt to stave off a threatened proxy fight by Henley, SFSP has restructured the company, selling off some large subsidiaries and paying shareholders most of the profits gained. Shareholders have already been paid dividends of $25 a share in cash.
Henley sued to block the issuance of bonds, which had been originally scheduled to take place March 1. The payout was held up awaiting a decision by Vice Chancellor Jack B. Jacobs of the Delaware Court of Chancery.
In the 50-page decision he issued Friday, Jacobs also rejected all other aspects of Henley’s suit, including an effort to prevent SFSP from continuing its policy of electing one-third of its directors each year on a rotating basis. Henley had wanted the entire board to be elected each year, a move to enable it to seek proxies for the entire board at SFSP’s annual meeting scheduled for May 24.
The judge also allowed provisions of SFSP’s so-called poison pill anti-takeover measures to remain in force. This defensive tactic allows SFSP to sell shareholders stock at reduced prices once any hostile acquirer buys 20% or more of the outstanding shares.
“We are studying the ruling and considering our alternatives,” Norman Ritter, a spokesman for Henley said. Henley owns about 15.7% of the outstanding shares of Santa Fe.
Henley has not yet mailed proxy solicitations to Santa Fe shareholders.
