Simmons Boosts Lockheed Stake, May Seek Control
Texas financier Harold C. Simmons disclosed Friday that his investor group has increased its stake in Lockheed to 18.9% of the aerospace firm’s common stock and that it may seek control of the board of directors.
Simmons met with Lockheed Chairman Daniel M. Tellep on Wednesday and demanded six seats on Lockheed’s board, which consists of 15 directors. Tellep refused the request and another that Lockheed drop a “poison-pill” takeover defense that was erected after Simmons began buying shares last year.
In addressing whether Simmons will make a hostile takeover effort on Lockheed, Tellep issued a statement saying: “Simmons provided no basis whatsoever for us to determine his intentions with respect to the company or whether his interests would be consistent with those of Lockheed and its other shareholders.”
In a Securities and Exchange Commission filing, the Simmons-led group, already Lockheed’s largest stockholder, said it had bought 629,000 shares between Jan. 16 and Jan. 23 at prices ranging from $39.38 and $39.75 per share. The filing indicated that Simmons may seek control of the board. The group operates through NL Industries, one of several firms that Simmons controls.
In light of Tellep’s rejection of Simmons’ demands, Simmons said he would have to consider “a range of options including seeking board representation. Mr. Tellep said he had no concerns about a proxy contest.”
Securities analysts agreed that Lockheed’s current management has little to fear, saying they had not changed their view that Lockheed’s takeover defenses would be effective in thwarting the Dallas investor.
Under Lockheed’s shareholder rights plan, if an individual or group acquires more than 20% of the company’s shares, other shareholders could be granted additional shares at a discount, thereby diluting the shares held by the potential raider. The company also created an employee stock ownership plan that controls 17% of the common shares.
“Simmons just wants to get his money back with interest,” said Paine Webber analyst Jack Modzelewski. “His average price for his Lockheed shares is $43, and the stock is selling at $39. So, he is $4 under water.”
Modzelewski said Simmons has invested $510 million in Lockheed and that the shares are now worth $466 million, a decline of about $44 million.
