Titanium Metals Investors File Suit Over $2.9 Bln Buyout

Titanium Metals Corp.’s $2.9 billion acquisition by Precision Castparts Corp. (PCP) was engineered by billionaire Harold Simmons, Titanium Metals’ controlling shareholder, to get around an earlier settlement of claims about Simmons’s company-related dealings, a pension fund said in a lawsuit.

Simmons and other Titanium Metals executives didn’t solicit other bids for the maker of titanium used in the aerospace industry and set up the buyout by Precision Castparts, maker of jet-engine parts, to “avoid certain obligations that members of the company’s board are obligated to undertake pursuant to the settlement,” lawyers for the Sunshine Wire & Cable Defined Pension Benefit Plan said in a Delaware Chancery Court suit.

Under the offer, stockholders of Dallas-based Titanium Metals will get $16.50 a share, a 44 percent premium, according to the company’s Nov. 9 statement about the deal. Entities controlled by Simmons have agreed to sell their 45 percent stake in the company, known as Timet, officials of Portland, Oregon- based Precision Castparts said.

The deal, Precision Castparts’ largest since at least 1995, extends an acquisition spree under Chief Executive Officer Mark Donegan, who has overseen more than two dozen purchases in the past decade, data compiled by Bloomberg show. Planemakers Boeing Co. (BA) and Airbus SAS have urged suppliers to consolidate to help support record increases in jet output.

Self-Dealing

John St. Wrba, a Titanium Metals spokesman, didn’t immediately return a call for comment on the suit. Dwight Weber, a Precision Castparts spokesman, also didn’t immediately return a call for comment.

A Louisiana pension fund sued Simmons and other Timet executives in Delaware last year accusing them of engaging in a half-dozen self-dealing transactions, including below-market- rate loans made by the company to firms controlled by the Texas billionaire and cost-sharing arrangements.

Timet officials agreed last month to settle shareholder derivative claims against Simmons and the rest of the company’s board by agreeing to toughen the company’s oversight policies regarding so-called “related-party transactions,” according to an Oct. 10 court filing.

A committee of independent directors also will review challenged transactions from the past and issue a report on them by Jan. 31 that will be published in the company’s proxy statement, according to the filing.

Final Hearing

Delaware Chancery Court Judge Leo Strine is slated to have a final approval hearing on the settlement of the derivative suit filed by the Louisiana pension fund on Jan. 9 in Wilmington.

Lawyers for the Sunshine Wire pension fund contend that Simmons and other Timet executives pushed to sell the company to Precision Castparts, one of the company’s largest customers, to avoid having to comply with the settlement’s requirements, according to the Nov. 13 suit.

“The proposed acquisition is thus, a sham and/or fraudulent transaction, a primary, if not sole purpose of which is to avoid the obligations of the settlement,” the lawyers said.

Lawyers for the Sunshine Wire pension fund noted the settlement papers for the earlier case didn’t mention a potential buyout and the suit over Precision Castparts’ acquisition isn’t covered by the accord.

Business Stakes

Simmons, 81, didn’t immediately return a call today for comment on the suit over the Precision Castparts buyout. His Contran Corp. holding company has stakes in businesses that include Keystone Consolidated Industries Inc. (KYCN), a maker of wire products, and Valhi Inc. (VHI), which manufactures titanium goods.

Simmons has long been active in Texas politics and made forays into national elections as well. He gave $2.3 million to the Restore Our Future super-PAC that backed Republican presidential nominee Mitt Romney, and in 2004, he donated $4 million to Swift Boat Veterans for Truth, a group that questioned Democratic nominee Senator John Kerry’s Vietnam War service.

The case that generated the earlier settlement is Louisiana Municipal Police Retirement System v. Harold Simmons, 7059, Delaware Chancery Court (Wilmington). The new case is Ira J. Gaines and Sunshine Wire & Cable Defined Pension Benefit Plan Dates 1/192 v. Titanium Metals Corp. (TIE), 8029, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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