Take Over Defenses: Beverly Uses a Pill to Fight a Hostile Bid

Big nursing home and hospice operator Beverly Enterprises Inc. squared off against an investor group in an old-fashioned takeover battle pivoting with a poison pill in the middle. Beverly directors rushed the shareholders rights plan into effect in late January when the firm was targeted by the group for a $1.5 billion offer, which was rejected. In the early going, Beverly checkmated the group – composed of Frontier Capital LLC, Appaloosa Management LP, and Franklin Mutual Advisers LLC – with a 10% kick-in point for the pill. The group, with an 8% stake, had little maneuvering room without triggering the pill, which allows shareholders to buy common stock at twice the market price of the nominal exercise price of $50 a share. As a result, the group launched a proxy battle to take control of the Beverly board by nominating a six-person slate to oppose the existing board at the company’s annual meeting. Winning control of a board doesn’t usually trigger the pill. Other companies voting in pills during January included Aspect Medical Systems Inc., Digitas Inc., Indus International Inc., and POZEN Inc. First Energy Corp. adopted a policy of creating a pill only with shareholder approval. Copyright 2005 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com