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Charges Fly as Vote by Shareholders of Oak Approaches

June 03, 1989|GREG JOHNSON | Times Staff Writer

SAN DIEGO — Charges, countercharges and a possible court fight surfaced Friday in the increasingly bitter proxy fight that Washington-based merchant banker Roderick M. Hills is waging for control of Oak Industries.

Oak Chairman E.L. McNeely Friday initiated the latest exchange by insisting in a press release that Hills, a former U.S. Securities & Exchange Commission chairman, has tried to mislead Oak shareholders about the financial health of the San Diego-based company.

In a related action disclosed by Oak Friday, MIM Ltd., a British firm that is Oak's largest shareholder, has asked a Delaware judge to protect its right to vote for Hills' group of directors during Oak's annual meeting in San Diego Tuesday.

MIM, which holds about 25% of Oak's stock, went to court Thursday "as a protective action," according to Steven Wilcox, a Boston-based attorney who represents MIM. The British company filed after Oak "threatened not to count MIM's vote during the upcoming annual meeting," according to Wilcox.

McNeely branded Hills' proxy solicitation campaign a "public relations effort . . . (that) is marked by a number of distortions, a tactic that is unfair to all Oak stockholders."

McNeely maintained that supposed problems contained in Hills' proxy materials "were addressed by an ongoing program that includes the sale of unprofitable assets, strengthening systems and management in existing divisions, improving product manufacturing and marketing efforts, cost-cutting, and substantial reduction in public debt."

McNeely, Oak's chairman since late 1984, said that Hills wants to turn Oak, which owns several unrelated manufacturing companies, into a merchant banking firm that would buy and sell widely diverse companies.

Hills on Friday described McNeely's allegations as "badly and intentionally misleading . . . the notion that I'm some sort of willy-nilly merchant banker is crazy.

"In his four years (at Oak), Ed has sold or offered for sale far more than 50% of Oak's traditional businesses," Hills said. "He's the one that has totally no discipline" in determining Oak's strategy.

McNeely on Friday described MIM's previously announced decision to support Hills' proxy slate as an attempt to "short-circuit" an agreement that Oak and the British company signed in January. That agreement prohibited MIM from taking sides in a proxy solicitation, McNeely said.

William Eberle, a Boston-based businessman who is one of three MIM representatives on Oak's board of directors, maintained Friday that MIM has an undeniable right to vote its stock at Tuesday's meeting. He also denied that MIM played an active role in Hills' proxy solicitation. MIM decided to cast its vote for Hills' slate because it was "in the best interest of all of Oak's shareholders," Eberle said.

"The notion that these people can't vote their stock is bizarre," said Hills, who maintained that his group had not solicited MIM for its support.

Hills, whose wife, Carla, is the Bush Administration's special trade representative, joined Oak's board in 1985 at McNeely's request. Hills is a partner in the Washington office of Donovan Leisure Newton & Irvine, a New York law firm. He recently was elected a director of Drexel Burnham Lambert.

Hills began the proxy fight in March after learning that he would not be renominated for a second term on Oak's board.

Hills gained support earlier this week when MIM said that it would support Hills' slate, which includes former Allied-Signal executive Daniel W. Derbes, former U.S. Atty. Gen. Elliot L. Richardson, San Diego Economic Development Corp. Chairman George Leisz and Gilbert Matthews, a senior managing director of Bear, Stearns & Co.

McNeely on Friday complained that Hills had "proposed acquisitions that (Oak) has chosen not to pursue. Hills' proposed acquisitions, included "a money-losing steel fabrication company and a small (financially troubled) company distributing cosmetic products copied from others," McNeely said.

Hills acknowledged that his Washington-based merchant banking firm had considered acquiring the fabrication company and the cosmetics distributor. But he maintained that he only alerted McNeely about those possible deals because of legal requirements.

"He's on an aggressive acquisition program, and the law says he should know about everything that came into my shop," Hills said. "The couple of things that I did suggest made a hell of a lot more sense than the things he was looking" to acquire, Hills said.

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