Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-12-29
BETHLEHEM STEEL
|. MERGER IS BARRED
Injunction Blocking Billion
Dollar Combination Is
Granted Stockholders.
Continued From First Page.)

Ouuet JSIMlLlo SdlQ IIldU IilC COhl
was without sufficiently supported facts
clearly to pass a judgment on the price
involved in the merger. Also, he said,
the Sheet and Tube directors and
shareholders as we'll were without "any
such basis for forming such Judgment.
Indeed, to put it mildly" the decision
said, sit must be frankly said that in
the present state of the record grave
doubt as to the adequacy of the con-
Sideration exists"
The decision was written in pencil by
the judge in a round, careful hand on
l9 pages of foolscap paper. He made
three copies himself, desiring that no
mistake be made in having a Stenog-
rapher or typist transcribe it.
One copy he fled with the clerk of
the Mahoning County Common Pleas
Court. The other copies were presented
to newspaper men.
DaltOn's Presence Censured.
The Judge also censured the presence
of Harry G. Dalton, partner in Pick
ands, Mather g. Co. of Cleveland and
director of BFSSlehem, at the Sheet
and Tube dirrNGors' meeting March II
when they Iatissd the merger.
Whether he voted or did not vote on
the merger contract, his presence and
approval of the merger at that time
were in equity breach Of trust and
against public policy"
This was one of the important points
Of attack by the merger foes.
1.-THE evidence is clear to the court,
the decision continued, that he Know
ingly was not acting for all the share
holders of Sheet &c Tube in that steps
were taken to delay advising them of
the existence Of and the point to which
the privately conducted negotiations
had gone.
"He was therefore In this not acting
for Sheet & Tube, but for the other
company (Bethlehen), even though
honestly intending to act in what he
believed to be for the best interests OF
Sheet & Tube"
Dalton was also criticized for not in
forming himself and Sheet & Tube
stockholders of the bonuses paid to
Bethlehem executives.
It was brought out in the injunction
hearing that in 1929 the bonuses
amounted to $3,600,000.
The court held that "this bonus sys-
tenn entered materially into the consid-
Grafton for the sale and into the value
Of Bethlehem stock to be received in
exchange for Sheet & Tube stock"
Controversial Topics Outlined.
sold after date of record, the voting of
proxies and other controversial points
brought out at the injunction hearing,
with regard to the Sheet & Tube stock
holders meeting were not touched upon
in the decision. 1t was confined to the
steps leading up to the Sheet & Tube
directors meeting on March IL.
Having found that the action of the
directors was invalid, he found no point
l. &c
Thus combining the decision, he saved
himself the trouble of gading through
the maze of controversial points grow
ing out of the stockholders meeting.
Stockholders Assented in April.
Terms Of the billion-dollar deal pro-
vided for Bethlehem to acquire Sheet
g. Tube. a S235, 000,0 600 corporation, on
the basis of one and one-third shares
of Bethlehem common stock for one
of Sheet g. Tube Sheet & Tube stock
holders gave their assent April 9, but
more than 100000 of the affirmative
votes, a deciding number, were chal-
lenged by the anti-merger forces.
Among those who led the fight for
the merger were the veteran steel man,
James M Campbell. chairman, and
Frank Purnell, president, of Sheet &
Tube; Eugene G.. Grace, president OF
Bethlehem, and Henry G. Dalton, a
director in both companies.
Eaton, organizer of the $350,000, 900
Republic Steel Corporation and largest
stakeholder. through his holding COM
panses, in Sheet & Tube, led the oppo-
sition.
The actual plaintiffs were the In
terpational Shares Corporation, an
Eaton investment concern, and Myron
Wick, jr., Youngstown broker, whose
heirs continued as co-plaintiff after his
death from pneumonia, which was
brought on by strain during the court
battle, which lasted nearly three
months.
Counsel Commits Suicide.
One other death occurred during the
hearings, the suicide of Leroy A. Man
chester, chief counsel for Sheet &c Tube.
His act was laid to overweight nerves.
The object of the merger, according
to its sponsors, was to give TO Bethle-
hem the youngstown company's bust
ness of manufacturing sheet and tub
ing and the youngstown interests the
greater diversihcation and financial
power of Bethlehem.
Opponents claimed 1t was disadvan-
vantageouS to Sheet 81 Tube. Auditors
testified Sheet g. Tubes record of earn
ings was better than Bethlehem's, that
it made more profitable products, that
its market and plant locations were
better and that it was in more sat-
isfactory condition.
Auditors for Bethlehem and other
defense witnesses said adjustments had
been made to compensate for any diff
ferences in the status of the firms.
The anti merger attorneys also
charged 100000 of the stakeholder
proxies voted for the merger were voted
illegally.
Stock Bought to Get Votes.
Negotiations for the merger started
early in 1880. Soon began the buying
Of stock to get votes. Meanwhile. di-
rectors of Sheet & Tube set March %
as the date of record" to determine
who could vote at the stockholders
election. The common belief was that
holders of stock on record on the date
designated could vote, regardless of
whether they sold their stock just after
the date of record.
Eaton believed otherwise, and after
the date Of record passed, bought
So, ZOO, 900 worth of stock. He admitted
he could not vote it, but claimed that
neither could the former owners, who
were still the holders of record, but
who no longer held any financial in
terest.
Inasmuch as the Sheet e. Tube char
ter required three-fourths affirmative
vote of stockholders, every proxy that
Eaton could prevent from being counted
as legal, was as good as a negative vote.
Many of the 100000 votes Eaton chal-
Ienged were in this category. He actual
ly held the proxies on about 100000 adj
ditionaI shares, which, if combined with
the protested votes, were more than
enough to defeat the merger.
While the stockholders election was
in progress, Eaton obtained an injunc-