The Kennecott Copper Corp. was put up for grabs again yesterday as the 2nd U.S. District Court of Appeals ordered a new election of company directors, giving Curtiss-Wright Corp. A second chance to mount its proxy challenge to Kennecott's management.
Curtiss-Wright narrowly lost the proxy challenge last May after the U.S. District Court temporarily blocked the company from voting its 9.9 percent interest in Kennecott.
The three-judge appeals court said yesterday that "there is a strong likelihood . . . that the election results were influenced by the criticism of Curtiss-Wright contained in the District Court's election-even decision."
And, in a frequently scathing opinion that was critical of both the lower court and Kennecott, the judges ordered that "a new election of directors be promptly held with a proper resolicitation of proxies."
"We're still reading the decision, said a Curtiss-Wright spokesman. "We can't say anything more than that we're very happy."
Kennecott had no comment. Nor did Standard Oil Co. of Indiana (Amoco), which last week disclosed that it has held talks with Kennecott about "some form of association."
Kennecott stock was active yesterday on the New York Stock Exchange, where it jumped 2 1/4 points to close at 27 1/2.
The expectation was that Kennecott will now eagerly pursue acquisition by Amoco or another large company in order to evade the clutches of Curtiss-Wright.
"Kennecott doesn't want any part of Curtiss-Wright and it may force a merger situation," said Stanley Schiff, an arbitrageur with Drexel Burnham Lambert. "Amoco was talking to them. Others may come in. Nothing is going to happen very fast. It's going to take some time. But I do think Kennecott will be taken over."
Billion-dollar Kennecott's problems, ironically, began with an acquisition of its own: After it received $1.2 billion in cash and securities from the government-oredred sale of the Peabody Coal Co., it last year used $571 million to purchase the Carborundum Co., an upstate New York abrasives manufacturer.
The move angered many Kennecott shareholders who would have preferred some distribution of the proceeds from the Peabody sale, since Kennecott's stock has been depressed for slump and extremely slim earnings.
Led by Curtis - Wright Chairman T. Roland Berner, the company acquired its nearly 10 percent stake in proxy challenge, promising Kennecott shareholders that if it succeeded in electing its alternative slate of directors, it would sell off Carborundum and either make a tender offer for outstanding Kennecott shares at $40 each, or make a $20 cash distribution for each share.
[TEXT OMITTED FROM SOURCE] wouldd no longer be viable if it sold Carborundum, sought to stop Curtiss-Wright from purchasing additional shares through a Utah state takeover statute. And it charged in federal court that Curtiss-Wright had violated both securities and antitrust rules.
After a three-day trial, U.S. District Court Judge Lloyd MacMahon ruled on the eve of the Kennecott annual meeting on May 2 that Curtiss-Wright had committed securities law violations, blocked efforts to vote its 10 percent holding, and said in his decision that Curtiss-wright's takeover at-gold at the end of the rainbow."
The appeals court immediately lifted the injunction against voting the shares but decided yesterday that have been prejudicial to the outcome of the vote.
And it sarcastically reversed MacMahon on his finding that Curtiss-Wright had violated the securities laws by making misstatements in its [TEXT OMITTED FROM SOURCE].
"Rare indeed is the proxy statement whose language could not be improved upon by a judicial craftsman sitting in the serenity of his cham [TEXT OMITTED FROM SOURCE].
The court yesterday found that Curtiss-Wright had not misled the shareholders, and meanwhile criticized Kennocott for being "less than forthright on its disclosures" on one key point.