
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, August 10, 1994                   TAG: 9408110020
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: By STEPHEN FOSTER STAFF WRITER
DATELINE:                                 LENGTH: Medium

HERCULES PURCHASE IN JEOPARDY

Alliant Techsystems Inc. said Tuesday that a group of dissatisfied shareholders has succeeded in getting its slate of directors elected to the company's board, casting doubt on whether Alliant will proceed with its proposed purchase of Hercules Inc.'s aerospace division.

Alliant announced last month that it had reached a tentative agreement to buy Hercules Aerospace, the Wilmington, Del., company's unit operating the Radford Army Ammunition Plant.

Alliant proposed paying $365 million and 3.5 million shares of its stock for Hercules' defense business.

But Tuesday, Alliant and Capstay Partners L.P., which owns 4.8 percent of the company's stock, announced that Capstay's six nominees were elected to Alliant's nine-member board.

During the weeks leading up to a July 27 proxy vote, Capstay questioned the direction Alliant was taking - specifically, certain elements of the Hercules deal.

Capstay said it would evaluate the merits of the Hercules transaction, such as additional costs to Alliant associated with assuming Hercules Aerospace's liabilities, the influence Hercules would have in Alliant following the deal and whether the purchase might prevent the company from pursuing other options.

In particular, Capstay questioned Alliant's payment of $6 million to Hercules, of which $3.2 million is for "costs and expenses" and $2.8 million is a "no-shop" agreement in which Hercules agreed not to seek competing buyers.

Capstay said the nonrefundable payment amounted to "an extraordinary use of the company's money ... in exchange for a nonbinding letter of intent."

After the proxy votes were counted Tuesday, spokesmen for both Alliant and Capstay said it was premature to speculate whether the new leadership would nix the Hercules deal. A joint news release from both groups said the company would continue to work toward the deal but also would explore other alternatives.

"We're going to proceed full speed ahead with the due diligence process of the acquisition," said Alliant spokesman Rod Bitz. "In terms of operations, I think it's business as usual."

But Dan Burch, speaking for Capstay, said "it's too early to tell" what the newly elected board will decide regarding Hercules.

In the July 27 vote, the Capstay nominees received 4.8 million votes out of 8.4 million cast, which represented about 86 percent of Alliant's shares, Burch said.

Hercules officials could not be contacted late Tuesday, although they and representatives of the U.S. Army, which owns the Radford arsenal, have said the deal would not significantly affect operations at the plant.

"With the proposed acquisition of the Hercules aerospace business, the Alliant Techsystems board is pursuing a strategy which is in stark contrast to the approach that Capstay's nominees advocate for Alliant," said Capstay general partner Joel Greenblatt, one of the newly-elected board members. He made the comment in a release distributed to shareholders prior to the vote.

by CNB