LTV Corp. Chairman Paul Thayer won a Distinguished Flying Cross and a host of other air medals piloting Grumman Corp. fighter planes in World War II.
But when Thayer's LTV launched a takeover bid for Grumman last month, the Long Island-based aerospace company in effect told him to stay in the cockpit and out of its boardroom.
A spirited defense by Grumman directors, management and employes and a favorable antitrust ruling by a federal judge last week so far has kept Grumman out of the clutches of the Dallas-based conglomerate.
LTV may yet acquire Grumman, the Navy's prime aircraft builder and manufacturer of the F14, but many analysts now believe the fight is over, even though LTV's offer does not expire until Friday. Grumman's Chairman John C. Bierwirth thinks so, too. He said there is enough Grumman stock in friendly hands--much of it in Grumman's pension and employe investment plans--to prevent LTV from acquiring the 50.01 percent it wants before paying for it.
Investors seem to agree. The price of Grumman stock has been falling since U.S. District Judge Jacob Mishler on Wednesday issued an order blocking LTV from buying Grumman stock until he can hold hearings on the antitrust aspects of a merger of two important defense contractors. The antitrust suit was filed by Grumman. LTV said it will appeal Mishler's order.
Although the Pentagon has said it will not oppose the merger, the Federal Trade Commission still is studying the takeover bid to see if it violates federal antitrust rules.
If Grumman is successful in fending off LTV, however, its tactics will not go down in the annals of classic takeover defenses. Grumman began the fight with defensive advantages rarely enjoyed by unwilling takeover targets.
When LTV made the offer, at least 30 percent of Grumman's stock was in "friendly" hands. That has risen to close to 40 percent as the pension and investment funds, and the company itself, have bought Grumman stock--actions LTV said are improper.
Moreover, few companies have a work force as loyal as Grumman's. "It's like a family here," said one employe. Although it is doubtful all 28,000 employes are as happy as he is, many of them have been willing to use their own cash to support management.
LTV made its move to take over Grumman quickly. It gave Grumman little more than a day's notice of its intentions, offered a seemingly attractive price and, in an attempt to explain the "merits" of its offer, made Thayer available to selected journalists for private interviews at the New York headquarters of its newly hired public relations firm.
The bid began with hush-hush phone calls to a select group of reporters Sept. 22. The caller, from the public relations firm Kekst & Co., would not say who or what was at stake, but promised an interesting takeover story.
When a reporter arrived at Kekst's midtown Manhattan offices at the appointed 10 a.m., he was handed an LTV press release announcing the proposed takeover and was told Thayer already had left his downtown lawyer's office as expected.
That on-time departure may have been one of the last smooth developments in LTV's bid to buy Grumman. On his way uptown Thayer encountered heavy traffic and arrived an hour and a half late.
Thayer was upbeat that morning. He talked about a happy and complementary combination of LTV's expertise in missiles and electronic equipment and Grumman's airplane ability.
He admitted he had been unable to contact vacationing Grumman chairman Bierwirth. Instead he had talked to Grumman president Joseph G. Gavin Jr., who, after a hasty consultation with board members, called Thayer back to tell him Grumman was not interested.
"I still think there's a chance we can do it on a friendly basis," Thayer said the morning of Sept. 23. He was wrong.
Grumman promptly warned shareholders to hang on to their holdings and "not to act hastily." Company officials found Bierwirth and his wife on the Mississippi riverboat Delta Queen, a day and a half upriver from St. Paul.
Bierwirth hopped off and authorized a statement urging shareholders to hang on to their stock.
The Grumman board subsequently met to reject LTV's offer of $45 a share for 10 million shares (about 70 percent of the outstanding stock). The board said it felt such a merger was "illegal" under antitrust laws. Furthermore, it said $45 was too little for Grumman (until shortly before word of the takeover leaked out, Grumman had been selling for less than $25). The battle was drawn.
Grumman filed suit to block the takeover on antitrust grounds. Its pension fund bought hundreds of thousands of Grumman shares to keep them out of LTV hands. The company's employe investment plan did the same thing. Between the two, they own about 40 percent of the outstanding Grumman stock.
Bierwirth paced the halls of Congress to drum up legislative resistance. Thayer took the same route, trying to convince legislators that LTV would be good for Grumman and good for national defense.
While employes at Conoco Inc. watched from the sidelines as E. I. du Pont de Nemours outmaneuvered two competitors to win the oil company, Grumman employes helped defend against LTV.
"There are a lot of people whose parents worked here and whose children work here," said Robert Simon, director of procurement for Grumman's aerospace subsidiary, the most important part of the company's operation.
About 8,000 employes at Grumman's Long Island facilities rallied on Sept. 28 to oppose the takeover. (Roughly 20,000 of Grumman's 28,000 employes work on Long Island.)
"I thought we needed some vehicle to express our feelings," said Simon. He suggested to fellow workers that Grumman employes place newspaper advertisements. "Within two or three days we had $10,000. We ended up with $15,000," Simon said.
The employe ads opposing the LTV offer ran in The Washington Post, in Dallas newspapers and in Long Island's Newsday, Simon said.
Employes also have used their own cash to buy Grumman stock.Simon said he knows one worker who sold his car to raise money to buy stock.
"I walk through the factory and people come up to tell me they have bought 200 shares or eight shares," said chairman Bierwirth.
Bierwirth said the employes have helped convince individual shareholders to keep their stock rather than selling it to LTV. Grumman has polled most of its medium-sized shareholders--those with a few hundred to 5,000 shares--and found all but a handful unwilling to sell to LTV.
"Some of those shareholders told me the only reason they are hanging on to their stock is that Grumman's employes reached through to them. A number said they could use the money, but that they were not willing to sell us out if we wanted to stay independent that much."
One of the major worries of Grumman employes, as well as the legislators who represent them on Capitol Hill, is that LTV will relocate many of the jobs at Bethpage, Long Island, to Dallas. LTV's chairman Thayer claims the fear is unfounded. He said LTV--which besides its defense and aerospace operations owns Jones & Laughlin Steel Co. and has interests in energy firms and ocean shipping--would add several hundred jobs in Long Island as part of its subcontracting work on the B-1 bomber. He also noted that since 1970 Grumman itself has eliminated at least 6,000 Long Island jobs.
LTV has sued in an attempt to prevent Grumman from buying its own stock--the company arranged a $200 million loan to do just that--and has charged Grumman's management with conflict of interest in using pension fund assets to buy Grumman stock. But Grumman employes do not seem to object. Retired employes, scared of $225 million of unfunded liabilities in the LTV pension plan, are as adamant as current workers in opposing LTV.
Although the financial maneuvering by Grumman management and employes by itself may succeed in thwarting the takeover bid, Judge Mishler's ruling might be icing on the cake. Litigation anaylsts said they were surprised by the ruling because the court's seldom rule in favor of antitrust considerations when the point of the suit seems to be an attempt to block a takeover.
But Mishler said he found enough merits in Grumman's arguments that the two companies compete in many arenas to issue the temporary order.
Bierwirth, who said Thayer and he have talked only once since the takeover bid began on Sept. 23, said at this point it would be reasonable for LTV "to call it quits." He said the two companies have to cooperate as subcontractors for Boeing in building a Navy carrier.
"There are lots of situations in the future where a joint venture may be to our mutual advantage. There's no reason now that can't happen. But it will get harder if the lawsuits continue and get more personal."
Bierwirth, a Grumman executive for 10 years and chief executive for eight of them, said that if Thayer doesn't call soon, "I'll call him."