A district judge has approved settlement of the remaining lawsuits against financially distressed construction giant Morrison Knudsen Corp., moving the company closer to a merger with Washington Construction Group Inc.
Morrison Knudsen, once a major name in U.S. construction with landmarks such as the Hoover Dam and Golden Gate Bridge to its credit, has been near bankruptcy for the past 15 months after former chairman William Agee tried to move the company into the mass transit field.Most of the lawsuits were settled in a 35-minute morning hearing. It took just 15 minutes Tuesday afternoon to approve settlement and dismissal of legal action filed by shareholder Daniel Wohlgel- ernter, Los Angeles, against MK Rail.
"It leaves the shareholders with a little rather than nothing at all," 4th District Judge Deborah Bail said.
That lawsuit was filed on Feb. 8, 1995, one day before the MK board of directors terminated Agee.
In 30 days, Bail's order becomes final after the deadline for filing appeals.
After that, the company will file prepackaged bankruptcy, in essence trading debt for equity in the company.
Following approval from shareholders, MK will proceed with a merger with the much smaller Washington Construction Group, which is based in Highland, Calif. The surviving company will retain the Morrison Knudsen name and will be headquartered in Boise.
Morrison Knudsen common stock lost 50 percent of its remaining value in heavy trading on the New York Stock Exchange on Tuesday. It dropped 50 cents to close at $1. Volume was nearly 5 million shares, 10 times the stock's normal daily average.
Rich Parry, MK legal vice president, said if there are no snags, the process should be complete by the end of September.
Attorneys for all sides agreed that to proceed with costly legal battles over MK's decline would accomplish nothing except destruction of the company. Bail noted it was a very complicated case and there was no guarantee who would win.
"The desire to preserve the company appears to be the common goal," the judge said.
"We can't afford to go through that lengthy litigation," Parry said after the hearing. "This is a very important step for us to get this out of the way."
As part of the settlement of lawsuits, shareholders will receive about $35 million in cash from the company, 2.9 million shares and about $8 million from the accounting firm of Deloitte & Touche.
Washington Construction, controlled by Montana business magnate Dennis Washington, announced last week that it would acquire Morrison Knudsen for $205.3 million in cash and stock and assume up to $50 million in outstanding loans.