Source: CA Cut Deal With Fidelity For
Company allegedly agreed to vote on
‘poison pill’ provision within 5 years
By Mark Harrington
September 1, 2001
Computer Associates International Inc., in exchange for support from
Fidelity Investments Inc. in the recent proxy battle, indicated they would
submit the company's "poison pill” provision against hostile takeovers to
a shareholder vote within five years, an industry source with close
knowledge of Fidelity's decision said Friday.
The source said that Fidelity, a Boston-based holder of 10 percent of CA
shares, informed CA it has internal guidelines that prevent it from voting
its shares for management if that company has a poison pill that deters
"reasonably priced tender offers” or "that doesn't allow shareholders to
vote on them.”
"CA management made representations they would” submit the so-called
shareholder rights plan for a vote in five years, the source said.
But CA spokesman Owen Blicksilver said Friday, "There's been no commitment
here of any kind regarding the pill. A majority of the board would have to
vote on any such change.”
He added, "The company has said it wants to have best practices in
corporate governance. What decisions the board makes on any corporate
governance issue is up to the board.”
Poison pills work by effectively diluting the shares of a party deemed
hostile by offering many new shares to all other holders. Such devices
"can be abused and often are,” said Gary Lutin, an investment banker who
ran a CA shareholders forum during the proxy fight. Lutin said
institutions frown on poison pills because they restrict stock activity
that could change control of a company or influence corporate conduct.
"They interfere with the exercise of shareholder property rights,” Lutin
said. "Essentially they entrench management.”
In parting shots at CA management on Wednesday, Texas investor Sam Wyly
charged that last-minute deal-making with large institutional holders of
CA stock helped the company win a landslide victory in its proxy fight
against Wyly's Ranger Governance Ltd.
But CA chairman Charles Wang, in a post-proxy interview on Wednesday, said
that "not one” deal was made with institutions such as Fidelity in
exchange for their support. CA won the proxy battle by a 3-1 ratio, the
A Fidelity spokesman said the company does not comment on proxy voting
Sanjay Kumar, CA's president and chief executive, did seem to leave open
the prospect on Wednesday that the shareholder rights plan, as the poison
pill provision is officially called, could be changed. "It's a board
issue,” he said then.
"The plan today stands as it is,” he noted, "and the board in the future
will have to consider what it will do with the rights plan.”
Kumar's statement differed somewhat from a stance taken by Wang in a
Newsday interview the week before in which he said that the plan, in place
since 1991, would not be changed.
Separately, the Chicago Tribune Friday cited sources close to Wyly in
reporting CA may "soon” bid farewell to two long-time directors --
co-founder Russell Artzt, an executive vice president at CA, and Willem de
In response, Blicksilver said, "We have every reason to believe that all
the directors will complete their terms.” He noted the company seeks to
expand the board by two members.
Wyly lost his bid to oust four CA directors in a two-month proxy bid that
ended in a landslide for CA on Wednesday.
The Tribune cited a source close to Wyly for the claim that Artzt and de
Vogel would "soon” leave the board. The paper suggested those resignations
led Barclays Bank, one of the larger holders of CA shares, to abandon a
previous backing of Wyly. Barclays officials were not immediately
available for comment.
The paper also reported "Wang promised to consider three people Barclays
suggested as possible board nominees.” Blicksilver denied any such deals
In the days leading up to the vote, Kumar suggested more than one CA
director might move on in a continuing "evolution” of CA's board. "There
are people on the current board who have said, if new people come on, that
they have done their service to shareholders,” he said.
But on Wednesday, both executives denied any board member would leave
during the next year.
Copyright © 2001,