Teaching Ling a Thing

One of the sharpest corporate skirmishes in memory swirled around Milwaukee last week, as Allis-Chalmers Manufacturing Co. found itself under heavy assault. The battle was joined by James Joseph Ling, 44, chairman of Dallas-based Ling-Temco-Vought, who during a nine-day fight for control of the company had eventually made a tender offer valued at $560 million--one of the biggest ever. But by week's end, staid Allis-Chalmers, which is the area's biggest employer, had delivered L-T-V its first defeat--however temporary--in Ling's long takeover history.

Looming Large. Ling's campaign naturally provoked nationwide fascination. Starting with a $3,000 stake in 1946, he had wired together a series of dazzling acquisitions to build a conglomerate that topped $468 million in sales last year. And this year "the Ling Dynasty," as L-T-V is sometimes called, has loomed even larger. In March a surprise Ling tender offer hauled Chicago's Wilson & Co. into the fold. Early this month, Ling announced a plan to take over Greatamerica Corp., the Dallas-based bank, insurance and airline (Braniff) combine controlled by his longtime ally, Troy Post. If Ling could take Allis-Chalmers in hand L-T-V bid fair to quickly become a $3 billion company.

Allis-Chalmers has 38,000 employees, runs 20 plants in the U.S. and Canada, is the third biggest U.S. maker of electrical and construction equipment and fourth in farm machinery. Under Chairman Robert Stevenson, 60, a minister's son who started off as an Allis-Chal mers tractor salesman in 1933, profits have more than quadrupled since 1961 to last year's $26 million, on record sales of $857 million. For all that, the company recently ran into trouble. The general slump in construction, rising production costs and a sticky three-month strike at two plants combined to plunge first-half earnings down by 50% compared with the same period last year.

To Ling, that seemed to ripen a prospect he had been watching for more than three years. In the military argot current at his Dallas headquarters, Allis-Chalmers had long been targeted as "Company X." Ling liked the way Allis-Chalmers products were "tied to the growth of the economy." The company also has a classic vulnerability to takeover attempts: its officers and directors hold less than 4% of its stock, which is a very small base from which to try to fight an attractive tender offer. Ling himself was in Milwaukee for a quiet look-see in July, and two weeks ago he moved in again.

Rotarian's Return. No sooner had Ling and several associates installed themselves in a suite at the downtown Pfister Hotel than Ling began his performance. Instead of the Big Man from Big D, Jim Ling played the visiting Rotarian. In a telegram to Allis-Chalmers' board, he offered to pay roughly $45 a share for 51% of the company's common stock--then trading at about $35 --if the board would give its O.K. Such politeness hardly suggested a Texas raider, and Ling himself soon ventured out to win the heart and mind of Milwaukee. He phoned Allis-Chalmers directors, then took Roscoe G. Haynie, formerly president of Wilson & Co. and now an L-T-V director, around to the Milwaukee Journal as living proof that bought-out bosses do not just fade away. About that earlier trip to town, Jim told reporters that he had seen a film about Wisconsin that "really was enlightening. I really hadn't known too much about this area."

Allis-Chalmers, for its part, thought it might teach Ling a thing or two. Within 48 hours, its board replied with a blunt rejection of the L-T-V offer, announced that "shareholders will be far better served" by a possible merger in the works with General Dynamics. Ling, back in Dallas by now, was unfazed. He merely uncorked "Plan B"--a new offer to buy all of the stock for a mix of cash plus two classes of L-T-V shares worth, by LTV's estimate, around $55 per share of Allis-Chalmers' common. Moreover, he promised Stevenson and six other directors spots on LTV's board, said that Allis-Chalmers could retain "existing management control."

"That changes the ballgame!" cried one Allis-Chalmers executive. And there, at least by Ling's calculations, it should have ended. Even Beauchamp (pronounced beach 'em) E. Smith, the Allis-Chalmers director with the biggest block of shares (21,560), pronounced the new offer "far, far more interesting." There was little likelihood that the company would find a savior with anything like LTV's bankroll (furnished by a group of banks headed by the Bank of America) and willing to offer a better price. The company, L-T-V figured, was boxed in and liable to all sorts of stockholder suits if it held out. Thumbs Down. Once again the Allis-Chalmers board retired to consider the offer. And once again it emerged with thumbs down. Stevenson cited doubts about the "realizable value" of the stock that L-T-V was offering, pointed again to the talks with his so far silent ally, General Dynamics. This time Allis-Chalmers had more vocal support. Obviously pulling for the home team was Thomas F. Nelson, the Wisconsin State securities division director. On the grounds that L-T-V had not registered a stock offer with his office, Nelson issued an order prohibiting L-T-V from making any more offers in the state.

Next day L-T-V withdrew entirely, saying it did not want to "enter a contest" for the company. Despite that statement, some who know Ling best are convinced that the next arena in his fight to take over Allis-Chalmers will be in a direct bid to shareholders.

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