Court Ruling Helps AT&T;’s Prospects for NCR Takeover
A federal judge on Tuesday invalidated NCR Corp.’s new employee stock ownership plan, dealing a blow to the computer company’s efforts to thwart a hostile takeover by American Telephone & Telegraph.
After the ruling from a judge in NCR’s hometown of Dayton, Ohio, AT&T; immediately increased its bid for NCR to $100 a share from $90, providing that it wins control of the company at NCR’s shareholder meeting March 28.
To gain control of NCR outright next week, AT&T; must persuade 80% of NCR’s shareholders to vote to replace the current NCR board with a slate nominated by AT&T.; If it fails to oust the entire board next week, AT&T; will be forced to wait at least another year to gain control of the company, a delay it is frantically trying to avoid.
Until Tuesday’s ruling, it was widely accepted that AT&T; would not have the necessary 80% shareholder support to replace the entire NCR board. But Tuesday’s ruling, coupled with the sweetened bid, opens up the possibility that AT&T; might prevail.
AT&T;, the world’s second-largest telecommunications company, is seeking NCR, the nation’s fifth-largest computer maker, to bolster its efforts to become a major player in the emerging market for computer telecommunications. Although AT&T; has been free to enter the computer business since its forced divestiture of the regional phone companies in 1984, it has spent billions on that effort without much success.
In his written decision, U.S. District Judge Walter Rice said NCR’s employee stock ownership plan, coming in the face of AT&T;’s $6.1-billion takeover offer, had the effect of perpetuating current management’s control of the company.
Under the plan, NCR workers were to receive voting rights to an additional 8% of NCR stock at the shareholders meeting. The move has been widely interpreted as an attempt to put stock in the hands of employees sympathetic to NCR’s attempts to remain independent of AT&T.;
“We’re pleased that the court has invalidated NCR’s ESOP, removing an important barrier to completing AT&T;’s offer,” AT&T; Chairman Robert Allen said in a statement.
“We are disappointed with the decision and are reviewing our available options,” NCR Chairman Charles E. Exley Jr. said in a statement.
Ten days ago, Exley refused to consider a $100-a-share offer AT&T; attempted to make to NCR directors. By taking the sweetened bid directly to shareholders, AT&T; bypasses NCR’s board, which has steadfastly refused its overtures for the past 3 1/2 months.
If the entire board is not removed and replaced at the meeting, AT&T; said it intends to continue with its $90-a-share offer.
Rice issued his ruling after hearing arguments during two days of testimony last week. During those hearings, a proxy solicitor testified that AT&T; might be able to oust the entire NCR board at the shareholders meeting if NCR’s stock ownership plan is ruled invalid.
