Simmons Seeks to Double His Lockheed Stake
Texas investor Harold C. Simmons, who made an unsuccessful bid for control of Lockheed Corp. last spring, has offered to buy an additional 10 million shares in the Calabasas-based company, which would nearly double his 19.8% stake.
Simmons, in an interview Thursday, said he still wants to control Lockheed and called on the company to eliminate its “poison pill” defense. The anti-takeover provision is triggered when an unwelcome suitor reaches 20% ownership.
Simmons’ offer was contained in an Aug. 29 letter from NL Industries, a Houston-based company he controls, to Lockheed Chairman Dan Tellep. Simmons offered $35 a share--a total of $350 million--for 10 million shares held in Lockheed’s Employee Stock Ownership Plan.
Lockheed stock closed at $26.375 Thursday, down 37 1/2 cents on the New York Stock Exchange.
Lockheed had no immediate response to the offer, which would give Simmons--through NL Industries--35.6% of Lockheed’s stock.
NL Industries’ stake, the second largest after the ESOP’s, was fattened recently to 19.8%. In a filing with the SEC, the firm said it bought 510,700 Lockheed shares between Aug. 15 and Aug. 29 at prices ranging from $26.25 to $28.75.
If NL hits 20%, the poison pill would entitle Lockheed to sell stock to other current shareholders at a discount, diluting the hostile buyer’s stake.
In the letter, NL Industries President J. Landis Martin asked the aerospace concern to amend the poison pill provision to allow NL to purchase the shares from the ESOP. The ESOP, which holds slightly more than a 20% stake, is exempt from the provision.
Simmons said the poison pill discourages potential bidders and prevents Lockheed shareholders from cashing in on the kind of stock price rises that occur during takeover bids.
“I wouldn’t mind acquiring controlling interest if I could do it at a fair price,” Simmons said. “I want to ensure value for Lockheed shareholders.”
Referring to the ESOP’s exemption from the poison pill provision, Simmons accused Lockheed management of attempting to use the employee stock plan to obtain controlling interest of Lockheed stock. The ESOP is affiliated with a company savings plan that allows employees to buy company stock. Lockheed matches 60% of each employee’s contribution to the plan, making the donation in the form of stock. At the current pace of stock contribution, the ESOP will have a 30% stake in Lockheed in about two years, Simmons said.
Noting that ESOP members can vote on company issues, Simmons also reiterated a charge he made earlier this year, that Lockheed executives established the ESOP to entrench themselves. The NL Industries letter to Lockheed “highlights the fact that they set up the ESOP to keep votes in management’s pocket,” Simmons said.
Lockheed spokesman Scott Hallman denied the charge. He cited a Lockheed statement released when the ESOP was announced in April, 1989.
“The ESOP is intended to stimulate employee involvement to make the company more productive and competitive by giving employees an added stake in the financial success of the corporation,” Hallman said.
ESOP votes are central to a legal dispute between Simmons and Lockheed. Simmons headed a slate of candidates that opposed Lockheed’s directors in an expensive campaign for Lockheed board seats last March. Lockheed last April announced that the incumbent directors were reelected by shareholders at the company’s March 29 annual meeting with 57.6% to 60.7% of the voted shares.
The flap over the ESOP vote began hours after the board election. At that time, a spokesman for the ESOP trustee said the trustee did not receive instructions on how to vote a block of shares believed to number at least 500,000 of the roughly 12 million shares owned by the plan. The trustee voted the 500,000 shares for management.
Simmons contends that the 500,000 shares should not have been voted for either side. Simmons filed suit April 18 in U.S. District Court in Los Angeles in an attempt to void the election. The suit also challenges the ESOP because plan members have not yet paid for most of their stock. Lockheed management helped establish the ESOP, guaranteeing the loan the plan used to purchase company stock. Members gradually acquire the stock from the plan.
On Aug. 22 Simmons amended his suit, contending that Lockheed’s directors violated their legal obligations to shareholders by creating the ESOP.