Testimony unfolds in TN/Publicis courtroom drama

Published on .

Delaware Chancellor William B. Chandler III said he will rule Dec. 23 on whether Publicis Communications can wage a proxy fight to upset True North Communications' plan to acquire Bozell, Jacobs, Kenyon & Eckhardt.The judge's comment came at the conclusion of more than seven hours of testimony and legal argument from attorneys and from Publicis Chairman Maurice Levy.

In last minute arguments on Dec. 22, a Publicis attorney contended an earlier agreement between Publicis and True North permits Publicis to oppose the BJK&E deal and to seek control of True North through a tender offer.

However, a True North lawyer contended the same agreement requires Publicis to not interfere with acquisitions such as that of BJK&E.The BJK&E deal is scheduled to be voted on by TN shareholders Dec. 30.Earlier Dec. 22 in the Delaware Court of Chancery hearing, Publicis chief Levy and True North attorney Lloyd Cutler offered widely different interpretations of a key section of the disputed agreement. It was signed when TN and Publicis ended a failed joint venture. The agreement left Publicis the owner of 18.5% of TN's common stock.

Mr. Cutler said a so-called "pooling section" gave Publicis the right to vote its shares against any TN acquisition plan. But, he said, the overall agreement barred Publicis from taking other steps to block True North's acquisitions. "I would not consider it to be a right under any condition for any business [partner] to be given a bust-up right," said Mr. Cutler.

Publicis Chairman Levy said True North board member Stephen Vehslage had insisted it was a mere accounting provision intended to overcome worries that Publicis would be obstinate in providing accounting information required to close any acquisition. Banging his hand several times on the witness stand, Mr. Levy said Mr. Vehslage had insisted the request was just an accounting convenience. "He said you have your shares and you have your right," Mr. Levy said.

In Chicago, a witness for Publicis testified before U.S. District Court Judge Joan Gottschall Dec. 22 that the owners of as many as 2% of the outstanding shares of True North Communications could be prevented from voting at the Dec. 30 TN shareholders meeting. The federal judge in Chicago is hearing other aspects of the True North/Publicis legal battle.

Retired Foote, Cone & Belding executive and former True North board member Lou Scott said he had favored a True North merger with Publicis when it was first suggested in 1995. He said he had come to oppose the idea "because the process was underway with Bozell" and that Publicis had had ample opportunity to make an offer before the Bozell pact was struck. To disrupt the plan now, he said, "would do irreparable damage to True North.

Richard Braddock, a True North outside director, said TN believed Publicis had no interest in True North after their joint venture was dissolved, and that the Bozell acquisition was not meant to block any future takeover bid by Publicis.

When Mr. Braddock was asked to discuss talks that took place last summer about a possible combination with Interpublic Group of Cos., the court went into closed session.

Earlier, Daniel Burch, president-CEO of proxy solicitation company MacKenzie Partners, New York, which represents Publicis in its $28 per share tender offer for TN, testified that stockholders who bought shares shortly before Nov. 18 would potentially vote against the BJK&E plan in order to have the opportunity to vote on the Publicis offer. The Publicis tender offer was formally announced on Nov. 17. Mr. Burch said the 2% could be "the determining factor" in the BJK&E vote.Testimony was scheduled to resume in federal court Tuesday.

Copyright December 1997, Crain Communications Inc.

Most Popular
In this article: