Corporations: The Race for Douglas

If there are many more entries in the race to take over California’s troubled Douglas Aircraft Co., it will have to be run in two heats.

Plagued by plunging stock (from a 1966 high of 112 to a close last week at 451), soaring operating losses ($16.4 million for the first three quarters of ’66) and a bloated backlog of unfilled orders ($3.2 billion worth), Douglas desperately needs about $400 million in new financing. The company for weeks has been negotiating with eight major banks to borrow most of that amount.

Trouble is, the bankers rightly or wrongly blame President Donald W.

Douglas Jr., 49, for the company’s woes, demand that he be removed from any policymaking position. And at the same time, Chairman Donald W. Douglas Sr., 74, insists that his son stay on.

At an impasse with the banks, Douglas Sr. has launched a series of merger discussions. Among companies invited to discuss a possible deal are the McDonnell Co. of St. Louis, North American Aviation of El Segundo, Calif., and General Dynamics Corp. of New York City. Admittedly interested in Douglas are New York’s Martin Marietta Corp., Venture Capitalist Laurance Rockefeller, the Signal Oil & Gas Co. of Los Angeles, and Fairchild Hiller Corp. of Hagerstown, Md. Signal last week offered Douglas $100 million for 5,000,000 shares of a new issue of 6% preferred stock. Converted to Douglas common stock at the rate of two to one, the holding would give Signal a 30%—and controlling—interest. Also Fairchild Hiller has offered Douglas $400 million plus immediate managerial assistance pending a possible merger, has assured Douglas Sr. that the family name would be retained in a new company to be called Douglas Fairchild.

Despite such new suitors, favorites in the race remained McDonnell, which controls an estimated 800,000 shares, or 15%, of Douglas common, and North American, a military and space contractor, which has the production facilities Douglas so badly needs.