Columbia Savings & Loan Assn. said Friday that it will issue a new class of preferred stock that will have 10 times the voting power of its common stock--a move that will solidify the Spiegel family's control over the Beverly Hills financial institution.
Any mergers or reorganizations must now be approved by both the common and preferred shareholders, the company said.
"This goes a long way toward protecting the company from a hostile takeover," Lee Eckel, Columbia's general counsel, said in a phone interview. Eckel said, however, that he is unaware of any hostile takeovers looming.
One preferred share will be issued as a dividend for each of 9.7 million shares of common stock that are now in circulation.
At the same time, Columbia Savings warned that the move may result in the eventual delisting of its common and preferred stock from the New York Stock Exchange because present exchange policy bars two classes of common stock with unequal voting rights.
The NYSE, however, is considering changing its dual-class stock rule and has told Columbia that it will delay delisting until the issue is resolved. In the unlikely event that a delisting does occur, Eckel said, Columbia will move its trading to the American Stock Exchange.
The Big Board rule applies to Columbia's new issue, known as Series A stock, because the preferred shares are convertible into common stock. About 22% of Columbia's common stock outstanding is controlled by the Spiegel family, including Thomas Spiegel, the chief executive.
But the family owns about 50% of the shares on a fully diluted basis, which measures the shares that would be outstanding if investors exercised all their rights to purchase additional common stock.
The Spiegels' control of the company would be enhanced, Eckel said, because the family is expected to hold on to its preferred shares while many other investors are likely to convert their new preferred shares into common stock in order to receive a higher dividend. The preferred stock's dividend is only 1 cent per share.
Columbia said the Series A shares will be issued May 5 to shareholders of record on April 15. The new shares will have only a nominal dividend but may be converted into common stock immediately. The common stock has an annual dividend of 24 cents.