Former Securities and Exchange Commission Chairman Roderick M. Hills, who is fighting for control of San Diego-based Oak Industries, on Tuesday gained the support of London-based MIM Ltd., Oak’s largest shareholder with nearly 25% of its outstanding shares.
Also on Tuesday, Oak Chairman E. L. McNeely issued a strident proxy solicitation letter that included an attack on Hills’ business experience. McNeely’s letter claimed that Hills wants to control Oak for his own personal gain.
The proxy fight “serves his interests--not yours,” McNeely told shareholders in the letter that came just days after Hills’ group blasted McNeely’s inability to “restore net operating profitability from Oak’s businesses.”
Hills, whose wife, Carla, is the Bush Administration’s special trade representative, is a partner in the Washington office of Donovan Leisure Newton & Irvine, a New York law firm. He joined Oak’s board in 1985 and recently was elected a director of Drexel Burnham Lambert.
Hills initiated the proxy fight in March, shortly after Oak’s board voted not to renominate him at its June 6 annual meeting in San Diego. Although McNeely initially asked Hills to join Oak’s board in 1985, relations between the two men have deteriorated in recent months.
Reported a Loss
Hills said that McNeely had previously ignored “quiet requests” that Oak hire a “competent industrial manager, a far better chief financial officer and (create) an acquisition strategy.
“On those three issues, MIM’s directors voted with me,” Hills said Tuesday. “Mr. McNeely’s reason for not (renominating) me was that he didn’t wish to have four dissenting directors on his board.”
Oak, a diversified company primarily involved in electronic components, reported a $511,000 net loss on $50.7 million in revenue for the first quarter ended March 31. McNeely, 70, joined Oak in late 1984, hoping to turn around the company that had reported $300 million in net losses between 1981 and 1985.
Buoyed by asset sales and other one-time gains, Oak has reported several profitable quarters. But under McNeely, Oak’s operating units have yet to perform consistently. Oak’s stock, which once traded at about $15, has languished at slightly more than $1 for the past two years. It closed Tuesday at $1.375, unchanged from Friday.
McNeely’s shareholder letter questioned whether Hills has the background needed to determine whether Oak is being properly operated. McNeely told shareholders that Hills in 1984 was “ousted as chairman” of Sears, Roebuck & Co.'s now-defunct World Trade division “amid persistent losses and criticisms of his unit.”
Calls It Incorrect
McNeely’s letter also suggested that after Hills resigned from Sears, he was “not invited to rejoin” Latham & Watkins, the law firm where he previously had served as a partner.
Hills on Tuesday called McNeely’s description of his roles at Sears and Latham & Watkins an “unprofessional, irrelevant and an incorrect statement . . . I simply didn’t ask to rejoin (Latham & Watkins). I think that’s a crummy thing (for McNeely) to say.”
Hills maintained that during his 10-month tenure at Sears World Trade, the fledgling global trading company “was on target” with its strategic plan and was meeting budget guidelines. However, Sears decided to drop out of the highly competitive business, Hills said.
Hills made available copies of a May, 1985, Oak press release that McNeely issued when Hills was elected to Oak’s board. In that release, McNeely expressed “the highest regard for (Hills’) business judgment. . . . With his special background and experience (Hills) will be a valuable addition to our board.”
That press release “was issued long after Sears World Trade, Latham & Watkins and all those things,” Hills said Tuesday.
McNeely’s shareholder letter “indicates that (McNeely) knows he’s losing” the increasingly bitter proxy fight, according to Hills.
Hills also made available to the media copies of a personal letter that U.S. Sen. William Proxmire sent to Hills in March, 1977. The letter praised Hills for doing “a superlative job” as chairman of the SEC from 1975 to 1977.
Oak spokeswoman Mary Lou Coburn declined to comment on the documents produced by Hills or the on MIM’s decision to support Hills’ group.
MIM, an investment firm with $40 billion under management worldwide, acquired its stake in Oak earlier this year. It already has two representatives on Oak’s eight-member board and will gain a third seat at Oak’s annual meeting next week in San Diego. In a filing Tuesday with the SEC, the three MIM appointees to Oak’s board said it was “in their best interests” to support Hills’ five-man slate during the upcoming annual meeting.
In addition to Hills, that slate includes former Allied-Signal executive Daniel W. Derbes, former U.S. Atty. Elliot L. Richardson, San Diego Economic Development Corp. Chairman George Leisz and Gilbert Matthews, a senior managing director of Bear, Stearns & Co.