Opinion ID: 483599
Heading Depth: 2
Heading Rank: 2

Heading: koppers' purchase of cutler-hammer stock in 1978

Text: 15 In March of 1978, Cutler-Hammer learned that Tyco Laboratories, Inc. had begun making large anonymous open market purchases of Cutler-Hammer common stock. On March 19, 1978, Fitzgerald and Byrom, along with others, met in Pittsburgh to discuss whether Koppers would like to purchase Cutler-Hammer stock. Koppers' Board of Directors met on March 27, 1978 to discuss the possible investment in a new issue of Cutler-Hammer convertible preferred stock in the amount of approximately 25 to 30 million dollars. The Koppers Board authorized the investment within certain general guidelines. The Board also authorized, upon completion of the investment, the purchase of additional Cutler-Hammer common stock sufficient for Koppers to hold 20% of Cutler-Hammer's outstanding stock for equity accounting purposes. Fitzgerald did not attend this meeting, and, because of his position as an outside director of Koppers, abstained from any involvement in the subsequent negotiations between Koppers and Cutler-Hammer concerning the possible investment. 16 On April 8, 1978, the Cutler-Hammer Board of Directors approved the proposed preferred stock sale to Koppers. On April 9, 1978, the Executive Committee of Koppers' Board reviewed and approved the agreement for the proposed stock purchase. The transaction was closed and the agreement executed on April 10, 1978, when Cutler-Hammer placed an issue of 650,000 shares of convertible preferred Cutler-Hammer stock with Koppers, for a negotiated price of $45 per share. Under the terms of the stock purchase agreement, the preferred dividend rate was the same as the current dividend rate for common stock, the preferred stock was convertible into common stock on a one-for-one basis, and, if converted, the preferred stock represented 9.9% of Cutler-Hammer's outstanding common stock. 17 After this initial purchase, Koppers began to purchase shares of Cutler-Hammer common stock on the open market. From April 10 until April 14, 1978, Koppers bought 742,500 shares of Cutler-Hammer common stock on the open market at an average price of $44.25 per share. Koppers then held approximately 21 to 22 percent of Cutler-Hammer's stock, if all of the preferred shares were converted to common stock. 18 On May 31, 1978, Koppers converted 640,000 of its 650,000 shares of convertible preferred shares into common stock. Koppers did not convert all of its preferred shares in order to preserve any special voting rights attached to the class of preferred stock. 3