U.S. District Judge Frederic N. Smalkin in Baltimore has dismissed a suit by American Telephone and Telegraph Co. that aimed to bar NCR Corp. from pursuing litigation to prevent a hostile takeover by the communications company.
Smalkin ruled yesterday that his court does not have jurisdiction in the suit, filed here last Wednesday, because AT&T has not actually sought or obtained enough proxies from NCR stockholders to start a proxy fight over the proposed takeover.
Proxy acquisition by AT&T could result in another request for the court to consider legal issues involving the Maryland Business Combination Act and the state's Control Shares Act, two 1989 antitakeover laws.
But Smalkin, citing a Supreme Court precedent and other case law, said in a ruling from the bench that legal issues involved in the takeover bid cannot be decided by the courts under the present circumstances.
AT&T sought a declaratory judgment and injunctions to bar NCR Corp., the nation's fifth-largest computer firm, from using the Business Combination Act to prevent the communications giant from attempting a takeover for five years.
AT&T said last week it would immediately begin a hostile takeover bid for NCR and offered a cash tender of $90 a share, or about $6.1 billion, for the target's common stock.
AT&T lawyers told Smalkin yesterday that the suitor is "contemplating" acquisition of enough revocable NCR proxies to force a stockholders' vote to remove the target's board of directors and a vote on the proposed takeover, but has not yet tried to acquire the proxies.
[An acquiring company uses the technique of a proxy fight to attempt to gain control of a takeover target. In a proxy fight, an acquiring company seeks to persuade the shareholders of the target company that the present management of the firm should be ousted in favor of a slate of directors favorable to the acquirer. If the shareholders, through their proxy votes, agree, the acquiring company can gain control of the target company without paying a premium price for the firm.]
Smalkin said the suitor's contemplation was not enough to prompt him to grant its motion for the declaratory judgment and the injunctions, which could have prevented NCR from gearing up to fight the takeover bid.
"There has to be a situation where there is no escape," the judge said. He noted that AT&T must first acquire enough NCR proxies to ignite the takeover fight before he could rule on legal actions under the Maryland antitakeover statutes.
John Henry Lewin Jr., one of AT&T's lawyers, told Smalkin that the company would decide "within 48 hours" whether it will try to acquire the required percentage of proxies to reinstitute the legal battle.
Francis B. Burch Jr., who represents NCR Corp., contended that it would be "irresponsible for the NCR board to take a public position on some undefined proxy position" by the suitor.
NCR Chairman Charles E. Exley Jr. said last week that the target would not consider an offer of less that $125 a share, or about $8.5 billion, for its common stock.
The target's board of directors also took several steps to protect the company against AT&T's takeover bid, but did not rule out a cash acquisition for the right price.