Gillette seeks to quash subpoenas

Gillette Co. asked Suffolk Superior Court yesterday to quash subpoenas from Secretary of State William F. Galvin on the grounds he lacks the jurisdiction to investigate the shaving giant's proposed sale to Procter & Gamble Co.

After acquisition plans were unveiled in January, Galvin initiated an inquiry to determine whether the $57 billion sale price short-changed Gillette shareholders, many of whom live in Massachusetts.

In a 19-page court filing, Gillette stated that only federal agencies have the authority to issue subpoenas regarding mergers and asserted that Galvin ''has exceeded his authority." And though it's headquartered in Boston, Gillette is incorporated in Delaware. As a result, it's outside Galvin's jurisdiction, Gillette claims in court documents.

''That's absurd," said Galvin in an interview. ''They're stonewalling. If they were being a good corporate citizen, they'd readily provide information."

Gillette spokesman Eric Kraus said the company had responded to four earlier requests for information.

''We would like to continue voluntary cooperation, but the secretary has made this impossible by issuing a formal subpoena," said Kraus. ''Instead of conducting an investigation, the secretary should join the governor and the mayor in welcoming P&G to the Commonwealth and in trying to convince them that this is a good place to do business."

Kraus's comments referred to an event last month that Governor Mitt Romney and Mayor Thomas M. Menino attended in a show of support for Gillette's plan to invest $200 million in its South Boston plant.

Robert Birnbaum, a partner at the Boston law firm Foley Hoag LLP who specializes in mergers and acquisitions, agreed with Gillette's position on this issue.

''Massachusetts law expressly bars the secretary from having authority over mergers," he said.

Gillette's court filing also raises the issue of state jurisdiction.

''The key question is whether Delaware or Massachusetts law applies," said Kent Greenfield, a Boston College Law School professor.

''I believe Gillette is right in saying that Delaware law would typically apply," Greenfield said. ''Having said that, I can imagine situations in which Massachusetts interests are great enough that Galvin could rightly assert the right to play a role. It's certainly an aggressive move on Galvin's part."

After P&G and Gillette disclosed merger plans, Galvin asked Gillette for internal documents that showed how the purchase price was determined. Critics have questioned whether Gillette was sold for strategic business reasons, as the companies contend, or for big executive payouts. Gillette chief executive James M. Kilts is estimated to be in line for a compensation package of $173 million.

Gillette has said the acquisition proposal was approved by the company's board, not by Kilts alone, and that it's Kilts's job to pursue strategic options, such as acquisitions, that would increase shareholder value.

In an earlier phase of his inquiry into the merger, Galvin hired a University of Virginia finance professor to review documents Gillette had submitted. Last month, Galvin said that review found that Gillette could be worth as much as $72 billion, about $15 billion more than the proposed sale price.

That finding, Galvin said, prompted him to escalate his inquiry into an investigation. On March 23, his office issued subpoenas to Gillette and the investment firms that advised it on the merger seeking additional information. Last week, Galvin filed a complaint at Suffolk Superior Court, asking the court to enforce his subpoena against Gillette. Gillette asked yesterday for the court to set aside subpoenas issued to itself and UBS Securities LLC and Goldman Sachs & Co., the investment firms that advised Gillette on the transaction.

Galvin said he wants to complete his investigation before Gillette holds a special meeting for its shareholders to vote on the proposed transaction.

Chris Reidy can be reached at reidy@globe.com.