Directors of Kaiser Aluminum & Chemical, which is involved in a hostile takeover fight, voted not to make a major acquisition before 1989 or to issue more than $100 million in common stock without shareholder approval, the Oakland-based company revealed Monday.
The two resolutions, which were approved March 6, are an attempt to allay shareholder concerns as the deadline nears on the attempt to oust Kaiser Aluminum's board. A group led by Oklahoma investor J. A. Frates has until Saturday to gather 50% plus one vote to remove the Kaiser Aluminum board and replace it with its own slate.
The Frates group, which has accumulated 21.6% of Kaiser Aluminum's stock, has offered to exchange a package composed of about $8 in cash and $13.50 in securities for each share of Kaiser Aluminum common stock.
Meetings With Big Shareholders
In a letter to shareholders, Kaiser Aluminum Chief Executive Cornell C. Maier and President A. Stephens Hutchcraft Jr. said that, in meeting with large institutional owners of its stock to discuss the Frates takeover proposal, the shareholders "expressed satisfaction with the steps management has taken . . . to restore Kaiser Aluminum to profitability."
"In fact, some of them have such confidence that better days are ahead for the aluminum industry in general and Kaiser Aluminum in particular that they have expressed concerns that their long-term investments would be materially diluted--either through the issuance of additional common stock (or securities convertible into common stock) or a major acquisition--prior to the time that they could realize the full benefits of such investments," the Kaiser officials wrote.
The board adopted the resolutions to assuage shareholder doubts "as to the primary thrust of (the) strategic plan which . . . is to return Kaiser Aluminum to profitability by returning its aluminum operations to profitability," Maier and Hutchcraft wrote.
$100 Million or More
Specifically, the board resolved not to make an acquisition priced at $100 million or more before January, 1989, without shareholder approval. In addition, the board resolved that Kaiser Aluminum would not issue without shareholder approval more than $100 million worth of common stock and securities convertible into common stock during 1986 and 1987.
In announcing a major restructuring last January, Kaiser Aluminum said it would form a new holding company with five subsidiaries, including one that would handle acquisitions. The company also said it would retire part of its bank debt by issuing preferred stock.
Leonard Conway, a spokesman for the Frates group, said that "the good news is they're not going to do the big acquisition they're talking about, which we thought was nuts. We certainly think this company has no business going out and making a major acquisition."
The resolution not to issue more than $100 million worth of common stock "is still not acceptable to us" because "we would be opposed to any dilution at all," Conway said.