In a ruling that could have implications in many unfriendly takeover attempts, a federal judge in Pittsburgh today enjoined Chemical Bank of New York from financing Talley Industries, Inc.'s proposed takeover of Washington Steel Corp.
Judge Paul Simmons said that Chemical Bank, which has performed many banking services for Washington Steel, violated its fiduciary responsibility to the Pennsylvania steel company by agreeing to serve as lead bank in Talley's unfriendly corporate takeover bid.
Chemical Bank said tonight it "did not violate" any fiduciary responsibilities and said it plans a prompt appeal.
New York analysts said it was the first time they can recall a court blocking a major bank from financing a takeover attempt because the takeover was aimed at a customer of the bank.
McGraw-Hill, Inc., which itself is fighting a merger bid from American Express Co., has made similar accusations against Morgan Guaranty Trust Co.
Morgan, McGraw-Hill's principal bank, agreed to serve as lead bank in financing what would be close to a $1 billion deal, if it ever comes off.
American Express, however, has said it will not make a former offer from McGraw-Hill unless the company agrees not to fight.
Several dissident shareholders in McGraw-Hill met today in New York to decide whether to try to wrest control of the giant publishing company from its current board of directors.
Judge Simmons said that Chemical Bank, the nation's sixth largest bank, "acted contrary to their duty" by serving simultaneously as an agent for Washington Steel and for Talley Industries.
Simmons, however, said his order does not prohibit Talley -- which among other things manufactures Westclox -- from seeking another lead bank in its attempt to take over the Washington, Pa., specialty steel producer.
Judge Simmons said that Talley, with headquarters in Mesa, Ariz., had done nothing wrong and was free to pursue its takeover attempt as long as it found another lead bank.
Simmons issued a 90-day injunction against Chemical Bank, but issued a strong, 11-page finding of facts that convinced one participant that he could be expected to make it permanent.
Attorneys for Talley argued Thursday that the company's merger bid would be "irreparably harmed" if Simmons issued the injunction because it might be difficult to find another bank to take the lead position in the financing.
The developments came as Federal Reserve Board Chairman G William Miller wrote House Banking Committee Chairman Henry S. Reuss (D-Wis.) that "misuse of confidential informa tion by a bank in a proposed corporate takeover could be viewed as an unsafe or unsound banking practice if such misuse exposed the bank to legal liability or damaged the bank's reputation, resulting in a loss of public confidence."
Simmons said in Pittsburgh that Chemical Bank, which served as stock transfer agent for Washington Steel and has access to confidential financial data about Washington's financial condition, had a responsibility to tell Washington about the proposed takeover.
He said that Chemical Bank's actions constituted a "breach of duty" to Washington Steel.
Talley last month offered $36 a share for Washington Steel, then upped the ante to $37.50 after the steel company's board rejected the offer. The steelmaker rejected the second offer as well, worth about $55 million.
In its fiscal year ended Sept. 30, 1978, Washington Steel had profits of $5.4 million on sales of $102.4 million.
Talley -- which makes clocks, clothing, leisure products as well as precision instruments -- had profits of $12.7 million on sales of $404.7 million in its fiscal year ended March 31, 1978.
Washington Steel, in fighting the takeover, also asked the judge to block Talley's takeover because Talley did not fully disclose its financial position nor revealed what it plans to do with the steel company. The judge found no reason to block Talley from attempting the takeover.