Aiming to discourage certain types of hostile takeovers, Cluett, Peabody & Co. announced Thursday a plan that could significantly boost the firm's debt if a suitor acquires 25% or more of the firm's stock.
The "poison pill" plan, which would give shareholders rights to a package of cash and debt securities, comes as Cluett is trying to discourage a threatened takeover by a group led by Sacramento real estate investors Paul A. Bilzerian and William B. Brodovsky, who own 9.9% of the New York-based maker of Arrow shirts and other brand-name apparel.
Their $311-million offer of $20 cash and $20 in debt securities per share--partially financed by an investment firm headed by former California savings and loan executive Charles W. Knapp--was rejected earlier this month by Cluett's board.
Another group headed by Dallas real estate investor Craig Hall, which also owns 9.9% of Cluett, also has said it may consider a takeover bid.
Analysts and Cluett officials said the poison pill is aimed at discouraging two-tier takeovers under which a suitor acquires a majority stake at one price and then offers an inferior deal for the rest.
The plan also will discourage highly leveraged takeovers in which a suitor might sell some of the company's assets to pay off debts incurred to finance the acquisition.
But anybody offering an all-cash price at a premium above the current stock price for all Cluett stock "has got it, no problem," said Stanley Lanzet, first vice president for research at Drexel Burnham Lambert.
If the price is high enough, such as $45 per share, shareholders would sell rather than exercise the rights for cash and debt, he said. David Tallant, attorney for the Bilzerian group, said Thursday that his client is still considering an all-cash offer and added that "there's never been any thought by the group to do anything but make the same offer to all shareholders."
Tallant did not want to comment further until the group has studied the plan.
Cluett stock rose 87.5 cents per share to close at $38.375 in New York Stock Exchange trading Thursday.
Under the company's plan, shareholders will be given rights to exchange, for a limited time, about 25% of their shares for cash, notes and sinking fund preferred shares with a combined market value of $45 a share. Such rights would be available if any person or group acquires 25% or more of Cluett's outstanding shares.
Further discouraging two-tier and highly leveraged takeovers, Cluett said the notes and preferred shares in the package would have covenants restricting new debt and preferred shares the company can issue, sales of Cluett assets and transactions between the company and any holder of 25% or more of the company's shares.
"While the company believes it can best maximize shareholder values by remaining independent, the plan in no way restricts bona fide offers that do not utilize the assets or borrowing capacity of the company to support the acquisition financing," said Henry H. Henley Jr., Cluett chairman and chief executive.
Henley reiterated opposition to the Bilzerian group's earlier takeover proposal, adding that Bilzerian "is a private investor in real estate with no experience in the apparel industry and little or no experience managing large corporations."