Seeking to block a possible unwelcome takeover attempt, Atlantic Richfield Co. is asking shareholders to approve a proposal to prohibit "greenmail" and to change the company's state of incorporation to Delaware from Pennsylvania, according to proxy materials released Monday by the Los Angeles-based company.
The firm's anti-takeover moves come in the wake of similar moves by other oil companies such as Unocal and Phillips Petroleum, which have been subject to recent stock raids.
Arco said in the proxy statement that it knows of no person or group accumulating or threatening to accumulate shares to take control of the company or to influence its management, but analysts have said the company is a possible candidate.
In the proxy statement notifying shareholders of an annual meeting scheduled for May 7, Arco said its board has unanimously recommended that shareholders approve the proposals.
One measure is designed to protect Arco from "greenmailers"--individuals who quietly accumulate a substantial stock interest as a prelude to a takeover, restructuring or sale of all or part of a company. Typically, the stock purchaser is not interested in actually acquiring the company but threatens to do so to force management to repurchase the stock at a substantial premium over market value or to secure a special benefit not available to other shareholders.
The proposal would require the approval of two-thirds of Arco's shareholders if the company planned to purchase directly or indirectly any of its voting stock owned by a person or group holding more than 3% of a class of voting stock for less than two years. Such approval, however, would not be required if Arco bought such stock at or below fair market value or as part of a company tender offer or exchange offer.
Arco said a 3% interest in its common stock would require an investment of about $311 million, assuming a price of $45 per share. Arco shares closed Monday on the New York Stock Exchange at $48.375, up 25 cents.
The proposal to reincorporate calls for a new, wholly owned subsidiary to be called Atlantic Richfield Delaware Corp. The existing Arco company would be merged into the new Delaware firm.
Generally, the change is designed to deter a proxy contest or removal of the incumbent board and is intended to encourage those interested in acquiring the company to negotiate with the company.
The reincorporation to Delaware would:
- Eliminate cumulative voting for holders of common stock in the election of directors. However, cumulative voting would be retained for holders of each of two classes of preference stock and of the special voting rights of the Series B preferred stock.
Pennsylvania law allows cumulative voting, under which a shareholder can take all his votes (equal to the number of votes to which he is entitled multiplied by the number of directors to be elected) and cast them entirely for one candidate or distribute them among two or more candidates. The procedure makes it possible for a shareholder to secure a board seat with less than a majority of voting rights.
- Eliminate the right of shareholders to call a special stockholders meeting and propose amendments to the certificate of incorporation.
- Eliminate action by shareholders without a meeting.
- Continue to classify directors into three classes. However, the change to Delaware would require a two-thirds vote to remove directors, whereas under Pennsylvania law all directors or an entire class of directors may be removed with or without cause by an absolute majority of votes.
If approved, a merger into the newly incorporated Delaware company would be effective May 7 or soon after.