The last time Cornell Maier and Joe Frates saw each other, neither was very pleased.
It was at a meeting Sept. 18 in the Oakland headquarters of Kaiser Aluminum & Chemical.
Frates, flanked by some of his partners and financial advisers, walked in with a plan for the friendly takeover of the troubled company.
Kaiser Aluminum Chairman and Chief Executive Maier, surrounded by his top executives and financial advisers, replied through a lawyer that he didn't have authority from the board of directors to discuss the sale of the company with Frates or anyone else. With that, the short meeting ended.
"We thought that was kind of cheeky, to put it mildly," Maier says.
Frates, who is now trying to oust Kaiser Aluminum's board, says he doesn't understand management's unfriendly attitude. Frates' subsequent calls to Kaiser Aluminum, including one on Dec. 5 when Frates and the group of investors he heads made its first actual takeover offer, have gone unanswered.
"They wouldn't talk to me on the phone, wouldn't return my phone calls, wouldn't accept our proposal, never took a look at our proposal," Frates said. "We don't like to try to assess blame in any circumstance, but we don't understand why we haven't been able to talk to them. If that has produced the hostile situation, why then we think it is their responsibility. . . . "
For its part, Kaiser Aluminum has said the Frates group's proposal is so conditional that it doesn't constitute an offer at all.
At the heart of the fight for control of the nation's third-largest aluminum company stand two men--one a low-profile investor from Oklahoma who has never been involved in a hostile takeover, the other a highly visible and vocal chief executive who has never worked for another company.
The Frates group, which has accumulated slightly more than 20% of Kaiser Aluminum's shares, also includes a reclusive British heir, Frates' sons, his son-in-law and some longtime associates.
The prize, Kaiser Aluminum, has rolled up $471.3 million in losses (restated to reflect an accounting change) during the last four years, thanks to a depressed aluminum industry, an eight-fold increase in power rates in the Pacific Northwest where 60% of Kaiser Aluminum's domestic capacity is located and a drought in Ghana that knocked out the company's most efficient smelter.
Maier says a restructuring plan begun in 1981 and cost-cutting programs are turning Kaiser Aluminum around and the company will return to profitability this year.
The Frates group has offered to pay about $8 in cash and $13.50 in securities for each share of Kaiser Aluminum, up from the original December proposal of about $7 in cash and $13 in securities.
The exact composition of the offer can't be determined yet, the group has said, because Kaiser hasn't made its books available.
Plans to Shrink Firm
If the takeover is successful, Frates has said he would reduce the company's heavy debt load by selling, refinancing or joint venturing many of the company's assets, shrinking Kaiser Aluminum by half and focusing it on aluminum and industrial chemicals business.
Kaiser Aluminum recently announced a restructuring plan that involves forming a holding company with five subsidiaries, refinancing bank debt and raising new capital by issuing stock or subordinated debt. The Frates group has called the plan a move to entrench management and has responded with a drive to replace Kaiser Aluminum's 12 directors with the group's own slate of 11, including Frates and two former Kaiser Aluminum executives.
Frates is stumping the country meeting with investors--20 institutions hold about 60% of the company's stock--asking them to sign and send in their white shareholder consent cards, which are like proxies, supporting the Frates group's slate. Maier is doing the same but is asking for the blue consent revocation card. Frates has until March 22 to drum up a majority vote.
Besides their interest in Kaiser Aluminum, Frates (pronounced Fray-tus) and Maier have several things in common.
Both are in their 60s--Frates is 65 and Maier is 61.
Both have a strong interest in their pet causes--for Frates it is a drug education program for young people while Maier devotes his time to minority youth unemployment and educational problems.
Both Frates and Maier spent their early careers in sales.
Frates started as a salesman at his father-in-law's pipe-tool company, called Ridge Tool, in Elyria, Ohio.
Rode the Circuit
Maier began at Kaiser Aluminum in a clerical engineering job but quickly became a salesman in the company's key Kansas City office. He made a weekly circuit of a territory that encompassed Missouri, Kansas, Nebraska, Oklahoma, Arkansas, eastern Colorado and Memphis, Tenn.
Frates has always avoided public attention. Until this takeover fight he shunned interviews. He isn't even listed in such common directories as Who's Who and Standard & Poor's Register of corporate executives and directors.