No. 703 April Term 1977, APPEAL FROM AN ORDER DATED MARCH 29, 1977 OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PA.; CIVIL DIV. at No. GD75-3858.
Gilbert J. Helwig, Pittsburgh, for appellant.
Allen H. Berkman, Pittsburgh, for appellees, Mr. and Mrs. Walter Barcheski, James D'Antonio, Harold B. Dally, Robert J. Donovan, William H. Ehrgott, Mr. and Mrs. Bert D. Pearson, Dr. and Mrs. Edward N. Peterson, Paul J. Piccirill and Alexander H. Scott.
Hewlett G. Skidmore, in pro. per., appellee, submitted a brief.
Watkins, President Judge, and Jacobs, Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ. Jacobs and Watkins, former President Judges, and Hoffman, J., did not participate in the consideration or decision in this case.
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This is an appeal from an order entered in a dissenting shareholder appraisal action under sections 515 and 908 of the Pennsylvania Business Corporation Law.*fn1
The action arose as a result of the merger of the Jones & Laughlin Steel Corporation (J & L Steel) into Jones & Laughlin Industries, Inc., II (JLI-II), a wholly owned subsidiary of Jones & Laughlin Industries, Inc. (JLI). The corporate parent of JLI, LTV Corporation, began its investment
[ 263 Pa. Super. Page 381]
in J & L Steel in 1968 with a tender offer to purchase J & L Steel common stock. LTV then transferred its stock in J & L Steel to its wholly owned subsidiary JLI. By March of 1969, JLI held approximately 63 percent of the J & L Steel common stock. Thereafter, JLI increased its ownership to 81 percent. By an Agreement and Plan of Merger dated October 22, 1974, it was proposed that J & L Steel be merged into JLI-II, thereby becoming a wholly owned subsidiary of JLI, with the common shareholders of J & L Steel receiving $29 per share in exchange for their stock. A proxy statement containing the terms of the plan was sent to the shareholders, and on November 22, 1974, after approval by the Board of Directors and a majority of the shareholders, the plan became effective. The following diagram may be helpful in understanding the relationship of the corporations both before and after the plan took effect:
The plan was filed with the Department of State, which awarded a certificate of merger.*fn2 Some 122 shareholders,
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representing approximately 25,365*fn3 of 15,905,716 outstanding shares of J & L Steel common stock, objected to the merger. After a motion in Federal court for an injunction preventing the merger failed,*fn4 these shareholders dissented to the merger at the shareholder meeting.*fn5
On December 20, 1975, J & L Steel sent a letter to each of the dissenters in which it offered them $29 per share for each share of common stock held by them*fn6 -- the same amount offered under the plan of merger. This offer was refused, and on February 21, 1975, J & L Steel filed a
[ 263 Pa. Super. Page 383]
petition in the Court of Common Pleas of Allegheny County seeking an appraisal and forced sale of the shares held by the dissenters.*fn7 Several dissenters filed an answer to the petition, with "New Matter".*fn8 Typically,*fn9 the new matter alleged:
10. The purported merger pursuant to the so-called Merger Agreement is in violation of and is not authorized by Pennsylvania Law because:
(a) The public minority stockholders are accorded different, discriminatory treatment from The LTV Corporation through its wholly owned subsidiary JLI as the record owner of an 81% majority of the same class of stock by being forced to relinquish their interest in J & L Steel at a set ...