M & A Roundup – Takeover Defenses: A Poison Pill That Can Disappear

Supervalu Inc. directors voted in a 10-year poison pill but left the door open to killing it well before it is to expire in 2010. The big Minneapolis-based food distributor and superstore operator attached a TIDE provision to its shareholder’s rights plan that calls for a review at least every three years by an independent committee of the board. TIDE stands for “three-year independent director evaluation.” “If a majority of the independent directors deem it appropriate, it may recommend to the board that the plan be modified or terminated,” a company statement said. Ad hoc actions on poison pills that responded to major developments continued to emerge in April. Nashua Corp., embroiled in a proxy fight for control of the board, redeemed its pill. Conversely, Brunswick Technologies Inc. quickly enacted a rights plan after CertainTeed Corp., a U.S. subsidiary of France’s Cie. de Saint Gobain, launched a hostile takeover offer. In an unusual move, a pill was adopted by a merger-bound company, Headhunter.net Inc., apparently to protect it while it completes a combination with the Career Mosaic subsidiary of advertising giant Omnicom Group Inc. Omnicom is to gain a 40% stake in the combined company, which will become the second-largest online recruiting service. Three companies that came public in April – MetLife Inc., Krispy Kreme Doughnut Inc., and Cabot Microelectronics Corp. – erected advance defenses by inserting pills in their capital structure. But that was not enough armor plating for Krispy Kreme and Cabot Microelectronics which lined up a broad array of defensive weaponry, including staggered boards. Krispy Kreme bylaws also require shareholders to submit advance notice of meetings, specify that directors can be removed only for cause by a two-thirds vote of shareholders, and instruct directors to consider all stakeholders (not just shareholders) in weighing acquisition offers for the doughnut chain. Cabot Microelectro-nics, an 80%-owned equity carve-out of Cabot Corp., put a unique spin on its defenses. Provisions requiring 80% shareholder approval to remove directors for cause and to amend bylaws will kick in only when Cabot sheds its interest. Other companies that installed poision pills in April included: Activation, Agilent Technologies, Chorus Communications Group, insci-statements, NextMed, Pennichuck Corp., Sensory Science, Valspar Corp., and Wallace Computer Services.