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Echlin takes SPX to court
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April 6, 1998: 12:58 p.m. ET
Auto parts supplier sues smaller rival in effort to block hostile takeover
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NEW YORK (CNNfn) - Nearly two weeks after unsuccessfully pleading its case for remaining independent to local legislators, Echlin Inc. has taken the argument to the judiciary branch.
The Branford, Conn.-based automotive parts manufacturer, which faces a $3 billion hostile takeover bid from SPX Corp., said it filed a federal suit alleging the smaller rival breached U.S. securities laws by making fraudulent statements.
SPX Corp. of Muskegon, Mich., called the lawsuit "frivolous," adding that it ensures Echlin's place in the "shareholder hall of shame."
The move comes after the Connecticut House of Representatives on March 25 rejected a bill that would have made it more difficult for SPX to proceed with its $48-a-share cash and stock bid, which it launched Feb. 17.
Under Connecticut law, a company must hold a shareholders meeting if it receives demands from holders of more than 35 percent of its outstanding shares.
SPX, which already owned 1.15 million shares, or 1.8 percent, of Echlin prior to launching its hostile offer, has stated and continues to argue that more than half of Echlin's shareholders want a meeting to convene.
"This is yet another transparent attempt by Echlin to disenfranchise its shareholders after more than 50 percent have exercised their right to demand a special meeting," SPX said.
However, Echlin contends that an independent audit conducted by Coopers & Lybrand has found holders of only 1.9 percent of Echlin's stock -- or 1,189,040 shares -- want a special shareholders meeting.
"Echlin does not intend to call such a special meeting," Echlin's Secretary and General Counsel Jon Leckerling wrote in a letter SPX Chairman and Chief Executive John Blystone.
In addition to the allegedly false statements, Echlin's Leckerling accused SPX of representing demands from unofficial Echlin shareholders and soliciting demands using different record dates.
"Echlin believes that your misuse of the proxy solicitation process and your false and misleading announcement that SPX obtained sufficient valid demands to call for a special shareholder meeting irreparably tainted the solicitation process, misled our shareholders and created uncertainty in the marketplace," Leckerling said.
SPX said it will challenge this suit "vigorously."
The company also said it continues to expect Echlin to hold a special meeting of shareholders by June 23.
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