Titanium Metals Corp. (TIE:US) officials agreed to settle investor claims that a $2.9 billion sale of the company was arranged to avoid a review of controlling shareholder Harold Simmons’ dealings with the maker of titanium used in the aerospace industry, according to a court filing.
As part of the settlement, Titanium Metals’ executives agreed to make more information about the buyout by Precision Castparts Corp. (PCP:US) available to shareholders, according to the filing in Delaware Chancery Court in Wilmington. Officials from Titanium Metals and Precision Castparts are pushing to close the deal by the end of the year.
Titanium Metals officials agreed to resolve the case to “eliminate the burden, risk and expense of further litigation,” lawyers for the company said in the Dec. 12 court filing.
Under the buyout offer, stockholders of Dallas-based Titanium Metals will get $16.50 a share, a 44 percent premium, according to the company’s Nov. 9 statement. Entities controlled by Simmons, a billionaire who lives in Texas, have agreed to sell their 45 percent stake in the company, officials of Portland, Oregon-based Precision Castparts said.
John St. Wrba, a Titanium Metals spokesman, and Dwight Weber, a Precision Castparts spokesman, didn’t immediately return calls yesterday seeking comment on the case.
A Louisiana pension fund sued Simmons and other Titanium Metals executives in Delaware last year accusing them of engaging in a half-dozen self-dealing transactions, including below-market-rate loans made by the company to firms controlled by the Texas billionaire and cost-sharing arrangements.
Titanium Metals officials agreed to settle the fund’s shareholder derivative claims against Simmons and the rest of the company’s board by agreeing to toughen the company’s oversight policies regarding so-called “related-party transactions,” according to an October court filing.
The accord also called for a board review of some of Simmons’ past dealings with the company. A final report of that probe was supposed to be published in the company’s proxy statement, according to the filing. Delaware Chancery Court Judge Leo Strine will decide Jan. 9 whether to give final approval to that settlement.
Lawyers for the Sunshine Wire pension fund, a Titanium Metals shareholder, filed a separate suit Nov. 13 alleging Simmons and other executives rushed to sell the company to avoid the board review of their earlier dealings.
The pension fund’s attorneys also alleged that Titanium Metals officials failed to disclose that Morgan Stanley (MS:US), the company’s financial adviser, analyzed “tax concerns raised by Simmons and his affiliates and the implications of a potential 2013 increased capital gains tax,” according to an unsealed Dec. 10 filing in the case. New York-based Morgan Stanley is the second-ranked adviser of mergers this year.
Strine had been set to hear investors’ request for an injunction to stop the buyout from being completed at a Dec. 19 hearing in Wilmington.
Under the terms of the settlement, Titanium Metals officials are required to make a filing with the U.S. Securities and Exchange Commission noting that Morgan Stanley officials “discussed the tax concern raised by Mr. Simmons and his affiliates and the potential implications that the national presidential election could have on the capital gains tax,” according to a copy of the disclosure, which was attached to court filings.
Simmons, 81, was unavailable for comment on the settlement of the suit over the buyout. His Contran Corp. holding company has stakes in other businesses that include Keystone Consolidated Industries Inc. (KYCN:US), a maker of wire products, and Valhi Inc. (VHI:US), which manufactures titanium goods.
The billionaire has long been active in Texas and national politics. He gave $2.3 million to the Restore Our Future super- PAC that backed Republican presidential nominee Mitt Romney in the 2012 presidential race. In 2004, he donated $4 million to Swift Boat Veterans for Truth, a group that questioned Democratic nominee Senator John Kerry’s Vietnam War service.
The case is Ira J. Gaines and Sunshine Wire & Cable Defined Pension Benefit Plan Dates 1/192 v. Titanium Metals Corp., 8029, Delaware Chancery Court (Wilmington). The case that generated an earlier settlement is Louisiana Municipal Police Retirement System v. Harold Simmons, 7059, Delaware Chancery Court (Wilmington).
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