Lockheed Factions Line Up Support as Showdown Nears

Lockheed Corp.’s board and a rival slate of directors led by investor Harold C. Simmons both obtained the backing of major institutional investors Wednesday, the last full day of an intensive proxy campaign for control of the company.

A group of New York City pension funds announced their support for the Lockheed board. Simmons’ new support came from the California Teachers Retirement Fund. While no one was willing to predict the outcome, most observers said they expected the contest to be quite close.

There was no word Wednesday from the trustee for Lockheed’s employee stock ownership plan about how employees voted in balloting that ended Tuesday. The plan holds nearly 19% of Lockheed’s stock and probably will be key to determining the outcome of the proxy fight.

Meanwhile, Lockheed management rejected a new proposal designed to reconcile the two factions, but the Simmons camp left the door open for compromise.

Shareholders will get a final opportunity to choose between the two slates at Lockheed’s annual meeting today at a Lockheed facility in Burbank. Many have already voted, but results may not be known for two weeks.

Shareholders vote their shares by delivering their proxy cards to a representative of the faction they favor. Those representatives will give the proxies to Corporation Trust, a company that will count the votes by hand.

Lockheed executives said the vote-counting will be a complex task. Shareholders can--and many probably have--voted more than once. Under corporate rules, a shareholder can change a vote by turning in an additional proxy. Only the last proxy delivered by a shareholder counts.

Corporation Trust must confirm the validity of proxies by checking signatures and by ensuring that the voter actually owns the stock--or owned it on the date of record, March 2.

The new backing for Lockheed that was disclosed Wednesday came from retirement funds covering New York City employees. The funds own 326,536 Lockheed shares, about 0.5% of the total.

In a letter to Lockheed’s management, officials of the pension funds said: “We believe that your . . . management team should have the opportunity to execute its business strategy to improve cost performance in the difficult climate of the defense industry in the 1990s.”

However, the New York city pension managers also asked management to shake up the current board by adding new members. The managers also asked Lockheed management to diversify its aerospace business by pursuing more non-military contracts.

Lockheed’s past diversification efforts have been a major point of contention in the proxy fight with Simmons. Lockheed has defended them, arguing that the company must reduce its reliance on military business because of expected reductions in Pentagon spending.

Simmons has criticized Lockheed’s diversification efforts, contending that the Calabasas firm should focus more on its core businesses of aerospace and defense contracting. Simmons has also said that he would put operations in two Lockheed divisions--electronic systems and technology services--up for sale if he could not quickly make them more profitable.

Simmons’ position was embraced Tuesday by the managers of the California teachers’ pension fund. The fund--covering 125,000 retirees and about 300,000 non-retired school employees--owns 425,412 Lockheed shares, about 0.6% of the total.

Thomas Flanigan, the fund’s chief investment officer, said the fund’s managers believe that Simmons would install a more capable management team than that led by Chairman Daniel M. Tellep.

“Lockheed is a good company that was built on defense and aerospace contracts, and it takes more of a financial type (like Simmons) to handle the future,” said Flanigan, referring indirectly to Tellep, who spent much of his career as an engineer.

Flanigan said fund officials decided to vote for the Simmons slate only after they failed Tuesday to get Tellep to agree to a proposed compromise that would have ended the proxy fight. Flanigan said he asked Tellep to give three board seats to Simmons as part of a deal that would have canceled the campaign against the incumbent directors.

NL Industries, a Houston chemical firm controlled by Simmons, is the Texas investor’s vehicle for his campaign against the Lockheed board. NL Industries owns 18.9% of Lockheed’s stock.

Flanigan’s bid was only the latest attempt to reconcile the two factions. A group of institutional investors asked Tellep on March 15 to give Simmons some board seats. Simmons reportedly had told the group that he was willing to abandon his campaign in exchange for representation on the board.

Lockheed spokesman Ron Meder said Wednesday that the company had rejected the offers, saying that they would “further the interests of a single shareholder but would not be in the interests of all shareholders.”

NL Industries President J. Landis Martin said Wednesday that the Simmons camp would not ask Lockheed to agree to such a compromise but that it is willing to consider such a deal if Lockheed management makes an offer.

Martin and Simmons will be allowed to spend 25 minutes presenting their case to shareholders at the annual meeting today.

Times staff writers Nancy Rivera Brooks in Los Angeles and Lance Ignon in New York contributed to this story.