Postings

Popping the Pill

After Tesoro, an oil refinery with a market cap of $6 billion, received an unsolicited tender offer from Tracinda Corp., a private investment firm owned by Kirk Kerkorian, the San Antonio company decided to play defense. It withheld recommendations to its shareholders on the offer and adopted a shareholder rights’ plan, commonly known as a “poison pill.”

From Tesoro’s perspective, the poison pill worked. After Tesoro’s rights’ plan was accepted, Tracinda withdrew the offer to purchase about 16 percent of the company’s shares for $64.

The poison-pill defense—first developed by Martin Lipton, a corporate lawyer from Wachtell, Lipton, Rosen & Katz (see “Corporate Governance,” Page 7)—has become increasingly rare as shareholders have expressed distaste for this strategy. Law firm Shearman & Sterling released a survey in December that found the number of companies with poison pills or classified boards continued to decrease in 2007. Of the 100 companies surveyed, only 17 had poison pills in place, compared to 33 of those surveyed in 2004.

Creighton Condon, a partner at Shearman & Sterling, says while there is a tendency for companies to eliminate the poison pill as a standing defense, he thinks many companies are prepared to put a poison pill back in place if they think the circumstances warrant it.

In Tesoro’s case, the shareholder rights’ plan had a 20-percent trigger, so it didn’t interfere with the original offer. ”The only thing it did was prevent Tracinda from buying additional shares once it owned 20 percent,” says Condon. “It’s sort of a test of whether or not Tracinda was truly a friendly shareholder, to a certain extent, and Tracinda’s response was to drop its tender offer.”

Adds Condon, “It wouldn’t surprise me if this is not the end of the story. Tracinda could certainly use this as a platform for a proxy fight next spring.” Meanwhile, Tracinda has set its sights on other targets. In late December, it announced that it was acquiring a 35 percent stake in Delta Petroleum. –Matt Perkins

Kraft Foods has elected Myra M. Hart and Frederic G. Reynolds to its now 12-member board. Hart is on the senior faculty at Harvard Business School, while Reynolds is the executive vice president and CFO of CBS Corp. Also, Louis Camilleri, chairman and CEO of Altria Group, will step down from the board.

______________________ 

McGraw-Hill Companies named Sir Michael Rake, chairman of British Telecom, and former chairman of KPMG International, to its board. Rake chairs the Commission for Employment and Skills in the U.K., and is vice president of Royal National Institute for the Blind. He sits on the boards of the Financial Reporting Council and TransAtlantic’s business dialogue.

______________________

Goodyear Tire & Rubber has named James A. Firestone, president of Xerox North America, to its board. Firestone previously served as general manager of the consumer division for IBM and for Ameritech as president of the company’s consumer services division.

______________________

Derek McClain was named to the board of Mutual of Omaha. McClain previously served as CFO and general counsel of Trammell Crow Company.

______________________

Borders Group named Vitamin Shoppe EVP and CFO Michael G. Archbold to its board. Archbold, also Vitamin Shoppe’s COO, previously served as EVP, chief financial and administrative officer of Saks Fifth Avenue, CFO and EVP at AutoZone, and CFO of the booksellers division of Barnes & Noble.

______________________

The Federal Reserve Bank of San Francisco named two new members to its board and redesignated current members. William D. Jones, president and CEO of CityLink Investment, and Daniel P. Myers, president and CEO of Bridge Bank N.A., were elected to three-year terms. In addition, board members David K.Y. Tang and T. Gary Rogers were re-designated for threeyear terms.