Echlin Inc. has implored the Connecticut House of Representatives for a little legislative assistance in fending off the $3 billion hostile takeover bid by SPX Corp. of Muskegon, MI. And as of press time in March, the tactic appeared to be working.
Connecticut-based Echlin, with annual sales of $3.6 billion, helped initiate HB 5695, which would block the removal of Echlin directors for a year, even if every shareholder voted against them.
The bill cleverly empowers the old board by barring any new directors the takeover company installed from voting on whether to accept the takeover offer. Fuming SPX officials say no other state has ever enacted uch "extreme legislation" to strip shareholders of their rights. Still, the legislation made its way out of committee.
"We remain confident that the elected officials of Connecticut will not enact this misguided, special-interest proposal into law," the company says in a statement.
But SPX stands undeterred. "We have been trying for a year to achieve a negotiated transaction with Echlin," says John B. Blystone, SPX CEO and president. "However, we have been repeatedly rebuffed in our efforts to negotiate a transaction."
SPX owns 1.1 million shares of Echlin's common stock, or 1.8% of the total shares outstanding. SPX has offered cash and SPX shares valued at $48 per Echlin share. As of March 13, Echlin's shares closed at $46.
If the deal goes through, SPX anticipates cost savings of at least $125 million in the first year, increasing to $175 million in the second year. The company plans to eliminate 3,000 positions throughout Echlin's operations, or nearly 10% of its global work force. Echlin has 30,000 employees in over 150 operations on six continents.