Simmons Turns Energy Toward His Own Firm : Proxy battle: After failing to win control of Lockheed, the Texan will try to restore NL Industries to a financially strong position.

Texas investor Harold C. Simmons walks away from his failed two-year bid for control of Lockheed Corp. battered and bruised and--like so many of the financial princes of the 1980s--probably relegated to the sidelines of the takeover business.

After all, Simmons-controlled NL Industries lost millions Monday when it abandoned a proxy fight for control of Lockheed’s board. Analysts say the Texan probably took a $100-million hit.

So Simmons, a self-styled “builder of companies,” is in a very different rebuilding phase. He will attempt to reconstruct his image as an astute investor and is expected to try to restore NL Industries to the financially strong position it held until recently.

Earnings at NL--a Houston-based firm that makes chemical additives used to add color to a wide range of products--declined 47% in 1990.

The drop was due partly to the dramatic slowdown in the real estate market. The real estate troubles hurt NL’s titanium dioxide pigment business because paint sales are largely dependent on new home construction and sales of existing housing, said Dennis Newkirk, NL vice president and controller.

In addition, NL customers in Europe and North America drew last year from huge titanium dioxide inventories acquired in 1988 and 1989, reducing their purchases of the pigment in 1990, Newkirk said.

As demand for titanium dioxide dropped, so did the value of the pigment, explained J. Landis Martin, president of NL and a member of the Simmons-nominated slate that was to challenge Lockheed directors in a now-aborted April 2 election contest.

“The price of titanium dioxide declined . . . in the 10% to 15% range,” Martin said. “It was a result of increased supply and sluggishness in the world economy--factors you can’t manage well.”

It wasn’t just pigment that colored NL’s ledger, though. The company’s long-term debt ballooned in the course of Simmons’ proxy wars with Lockheed management.

Debt rose from $383.9 million in 1989 to about $1.1 billion by the end of 1990. About $100 million of that debt stems from borrowing for the construction of a plant in Lake Charles, La. However, most of the long-term debt is a result of borrowing to pay off previous loans.

Some analysts believe that NL would have been able to retire the old debt without such heavy borrowing if it had not invested so heavily in Lockheed stock. Simmons bought 19.8% of the aerospace giant’s shares, only to sell the bulk of his half-billion-dollar holding Monday at a $30-million loss.

Indeed, some experienced Simmons watchers believe that NL was forced to abandon its Lockheed challenge for financial reasons.

“I think that Simmons and Lanny Martin couldn’t finance the (proxy) fight,” said Charles Rose, managing partner of New York-based C. J. Rose & Co., a money management firm.

Rose noted that the demise of the high-interest “junk bond” market has made it difficult to raise the money to finance takeovers. Financial institutions have also grown reluctant to loan money for proxy battles, he said.

“They were going to have to sell their stock or take over Lockheed--and takeovers are impossible in this environment,” Rose added.

Martin, however, contended that NL could have held its Lockheed block longer had there been any prospect of winning seats on the Calabasas company’s board. NL executives have said that the company had about $400 million in cash before the selloff of Lockheed stock--enough to make its long-term debt situation manageable.

Now, Martin said, NL is making adjustments and cutting costs.

“I expect the company to rebound next year,” Martin said. “I can’t project this year, but we’re still in a downward cycle.”

Martin said he and Simmons will begin to look for new investment opportunities for the $486 million that NL collected from the sale of its Lockheed stock.

Simmons, who already controls more than a dozen companies, may increase his stake in his current holdings or may purchase stakes in other companies, said George Gaspar, an analyst at Robert W. Baird & Co. in New York.

“Simmons made a mistake with Lockheed, and he’s decided to move on,” Gaspar said. “But he’ll be back in the investment market. He’s down, but I wouldn’t count him out.”

SIMMONS VS. LOCKHEED Aug. 29, 1988: NL Industries begins to buy Lockheed stock.

April 4, 1989: Lockheed establishes an employee stock ownership plan, seemingly to thwart a potential takeover bid by NL Chairman Harold C. Simmons.

Nov. 19, 1989: Lockheed announces that it will be forced to take a $300-million fourth-quarter writedown in conjunction with the P-7 anti-submarine aircraft program. The value of Lockheed shares plummets.

Jan. 31, 1990: Simmons meets with Lockheed management, requesting board representation and elimination of a “poison pill” provision. NL now controls 18.9% of Lockheed’s stock.

Feb. 4, 1990: Lockheed’s board officially rejects Simmons’ requests.

Feb. 21, 1990: NL announces that it will mount proxy fight.

March 26-28, 1990: The California Public Employees Retirement System, a pension fund for Florida state workers and other key institutional investors say they will support Simmons’ rival slate. Lockheed rejects NL’s request for three board seats but says it will add “up to three” additional directors, subject to the approval of major shareholders.

March 29, 1990: Lockheed Chairman Daniel Tellep declares victory after voting at the firm’s annual meeting.

April 16, 1990: Annual meeting vote results are announced; the contest is closer than expected. Lockheed’s slate prevails over Simmons’ by 62% to 38%.

Nov. 5, 1990: NL proposes a $1.6-billion buyout of Lockheed, with half the purchase price to be financed by Lockheed.

Dec. 3, 1990: Lockheed rejects Simmons’ buyout offer and names four new board members.

Feb. 6, 1991: NL proposes that Lockheed nominate and support for election three NL-backed directors, promising not to wage a second proxy fight if it gets the representation.

Feb. 7, 1991: Lockheed rejects NL’s request.

Feb. 12, 1991: NL announces it will mount new proxy fight.

March 18, 1991: Simmons sells 12 million Lockheed shares and abandons proxy battle.