Opinion ID: 1799426
Heading Depth: 2
Heading Rank: 6

Heading: After Gulf's Purchase Events Leading to Lawsuit.

Text: After the purchase agreement had been entered into, Gulf issued a press release announcing that it had purchased a substantial block of Fenestra shares for investment purposes. On June 14, 1963, Farley, Friedman, and Herzfeld, an attorney for Gulf, met with Fenestra representatives and advised them that Gulf, along with others, held the majority of stock in Fenestra and requested that six of the 11 positions on the board of directors be immediately given to Gulf representatives. Gulf was advised that the majority, or management, directors were opposed. They agreed, however, that Farley and Friedman would be elected immediately and that consideration would be given to other Gulf nominees. It had been hoped by Gulf that at a meeting of the board of directors they could obtain control of the board without having to await the next annual meeting of stockholders which would not take place for another 8 or 9 months, that is, in March, 1964. What came to be of unusual importance in the next several weeks leading up to the all-important June 28th meeting of the Fenestra board of directors was the question of the acquisition by Fenestra of a smaller company known as Freeman Industries. This agricultural implement company was first mentioned to Fenestra management by Brainin back in January, 1963. Only slight mention was made of Freeman by management in the May 13 and May 16, 1963, meetings of the Fenestra executive committee, but it was indicated that a visit to Freeman was to be made May 29th. At or about the time of the sale of the Brainin group shares to Gulf, Fenestra President Leslie visited Freeman and became increasingly interested in its possible acquisition. In the early part of June, 1963, he sent two assistants to Freeman Industries located in Peru, Indiana, for the purpose of examining the financial statement and assets of Freeman. President Leslie arrived at an understanding with Freeman and on June 21st signed a commission agreement with a Mr. Russell, the broker's representative. At the time of this informal agreement with Freeman, Fenestra management had not sought any independent appraisal or analysis of Freeman; it was done afterwards, that is, in July, some 5 or 6 weeks after Gulf had acquired the controlling interest in Fenestra stock and evinced a keen interest in some kind of transaction between Gulf and Fenestra. Arrangements were made by President Leslie for an immediate analysis of the proposed Freeman acquisition with Robert Heller & Associates, a firm of management consultants. On July 17, 1963, President Leslie and Director Klein met with Heller representatives, and on July 26th a report was furnished to Fenestra by Heller. The results of the Heller report were not communicated to the minority or Gulf group directors at any time prior to the scheduled meeting of the board in which the proposed Freeman acquisition was on the agenda for approval. It should be added that the Heller report, although generally favorable to the acquisition, was guarded in its appraisal of Freeman for several stated reasons. For one thing, Freeman's success was thought to be due largely to one man, Mr. Freeman, its president, giving rise to uncertainties in the event he should no longer manage the firm. Another possible weakness was said to be in the fact that Freeman manufactured short line or specialty farm implements which could be in jeopardy at any time from the competition in that industry. Another reservation in the Heller report was the fact so much of Freeman's product was sold to one customer, Allis-Chalmers. The Gulf group was opposed to the acquisition. Later, both sides accused each other of bad faith: the management directors said Gulf was opposed because Gulf wanted to keep Fenestra assets available for a possible deal with Gulf; Gulf said management interest was spurred only after Gulf came into view as a possible purchaser of controlling interest. Gulf claimed that management wished to engage Fenestra assets in any way possible so as to discourage Gulf interest which appeared as a threat to entrenched management which had little stock interest but great interest in salaries and fees.