Simmons’ Group Calls for Ban on ‘Greenmail’ : Takeovers: NL Industries revises its earlier proposal and matches that of Lockheed’s directors.

In a second effort designed to show disinterest in a payoff from Lockheed, the aerospace firm’s largest shareholder said Wednesday that it will drop a plan that would restrict the payment of “greenmail” in favor of a broader proposal that would prohibit the practice.

The plan for the new proposal was advanced by J. Landis Martin, president of NL Industries, a Houston-based firm headed by Texas financier Harold C. Simmons. Simmons is waging a proxy battle to take control of Lockheed by leading a rival slate of directors, which includes NL Industries’ Martin.

Martin said the rival slate would match an anti-greenmail proposal made hours earlier by Lockheed’s directors. The aerospace firm’s board took an official stand Wednesday against the payment of greenmail and voted for a proposal that would prohibit the practice.

The board’s suggested bylaw amendment, which must be approved by owners of Lockheed stock, would prohibit the payment of greenmail without prior approval by the shareholders. Lockheed will ask its shareholders to approve the proposed amendment at its March 29 annual meeting.

A company pays greenmail by buying back stock from a corporate raider--an outsider who wants to own or control a company--at a price higher than the market value.

The board stand officially affirmed Lockheed’s initial response to a proposal from Simmons, who had, in statements Tuesday, announced a proposal for restricting greenmail payouts by Lockheed. The proposal by Simmons, who controls 18.9% of Lockheed shares through NL Industries, would have permitted payment of greenmail only to shareholders who have held stock for two years.

Lockheed executives immediately responded to Simmons’ proposal, saying Tuesday that they have no intention of paying greenmail to any shareholder.

When the board on Wednesday took the greenmail issue a step further by announcing a proposed ban, Martin and the rival slate adopted the same proposal by dropping the provision to pay shareholders who had held stock for at least two years.

“I’m delighted that the Lockheed board followed our lead,” said Martin. “We’re opposed to greenmail and we’re glad to have this issue before shareholders.”

The proxy fight reached the pages of three major newspapers Wednesday in the form of an advertised message from Simmons to Lockheed shareholders.

In full-page ads in The Times, the Wall Street Journal and the New York Times, Simmons criticized Lockheed’s management and asked shareholders to withhold votes for the management slate of directors.

“We believe that the present Lockheed board is unable to give Lockheed the direction necessary to compete effectively in the changing environment of the space and defense industries,” Simmons said in that statement. “Again, we urge you to take no action until we have had the opportunity to send you our proxy materials and you have had the time to consider the issues.”

Lockheed would make no comment on the advertisements. The company will communicate its plans and positions to shareholders in forthcoming proxy materials, a spokesman said.

Simmons’ decision to buy newspaper space for a statement to shareholders was not surprising, said Patricia Trent, an analyst at Seidler Amdec Securities in Los Angeles. Trent noted that Simmons indicated in January that he planned to challenge Lockheed’s board at the annual meeting this year.

The meeting is usually held in May, but Lockheed surprised much of the financial world by scheduling the meeting for March 29. The scheduling surprised Simmons and forced his hand, Trent said.

The newspaper advertising, Trent added, “is a logical step. He (Simmons) had to do something quickly.”

Another analyst, Howard Rubel of the C. J. Lawrence investment firm in New York, said Simmons and Lockheed management have both failed to explain how they would improve the performance of the company.

“Both sides are posturing at this point,” he said.