Mead Corp., fighting to resist a proposed takeover by Occidental Petroleum Corp., yesterday attacked Occidental's profit record, its management and the terms of the proposed exchange offer.
A Justice Department spokesman meanwhile said the department's anti-trust division has "a full-fledged civil investigation going" into possible anti-competitive effects of the proposed merger which could violate Section 7 of the Clayton Act.
He said the investigation goes beyong the routine look the department gives to every major merger proposal and represents the most intensive kind of probe the department undertakes prior to deciding whether to formally challenge an acquisition in court.
While there is currently no significant overlap in the main business activities of Occidental, primarily an energy and natural resources company, and Mead, a forest products and industrial supplies manufacturer, a source said Mead has had plans to go into the chemical business, an area where Occidental does have operations, and that the Justice Department is trying to determine whether the merger could inhibit potential competition in the chemical field.
The Mead response was made in a filing with the Securities and Exchange Commission that is a preliminary to sending the information in a letter to shareholders of the Ohio-based paper products company.
Occidental has offered to acquire any or all Mead common shares in exchange for newly issued Occidental preferred stock and preferred shares convertible into Occidental common stock. If all Mead shares were tendered, the estimated value of the transiation is just under $1 billion.
Mead, in its proposed letter, said that acceptance of the Occidental proposal would, in its view, reduce the ratio of the combined company's earnings to its debt service and preferred dividend requirements to an "extremely low" level.
Mead also claimed that "if Occidental were successful in acquiring Mead on its terms, your board believes that the resulting company would be so financially leveraged as to impair the ability of the resulting company to grow."
As to Occidental's operations, Mead noted the company reported a net loss for the first half of 1978 of 35.9 million dollars after some one-time write-downs and accounting changes, that Occidental is "subject to numerous lawsuits which could have a material adverse effect on it," that a large part of Occidental's revenues derive from foreign operations in the North Sea and Libya that could be impacted by government actions, that the company's coal production has declined in each of the last five years and that it continues to suffer "significant" losses from tanker operations.
Mead also noted that since 1971 Occidental has three times agreed to consent decrees with the SEC on various violations of the antifraud provisions of the federal securities laws.
It also pointed out that Occidental Chairman Armand Hammer is 80 years old and has told Mead management "that he makes the important decisions at Occidental."
Occidental which has filed a registration statement with the SEC on the proposed exchange offer, said it was unable to comment on the Mead assertions.
Occidental, in its prospectus, indicated that the exchange offer would be considered taxable by the Internal Revenue Service unless Occidental was able to obtain more than 80 percent of the Mead shares.
Mead's directors last Friday unanimously turned down an approach from Occidental, calling the offer "inadequate and illegal." It also filed suit in federal court against the Los Angeles-based oil and natural resources company, claiming it had manipulated trading in Mead's stock "in an attempt to pre-condition Mead shareholders and the marketplace" to help the takeover succeed.
Occidental has filed a counter-suit, seeking to force Mead to disclose "Material facts" that it says would correct "misleading" statements that were made in rejecting the offer.