CA Keeps Promise, Shortens Poison Pill
By Mark Harrington
Computer Associates International Inc., apparently making good on a
promise made during its bitter summer proxy fight, Friday said it would
allow its poison pill against hostile takeovers to expire five years
earlier than planned.
The pill now expires in November
of 2006, instead of May 2011.
The news was welcomed cautiously
by shareholder advocates, who generally disapprove of poison pills because
they tend to entrench existing management.
Poison pills, also known as
shareholder rights plans, work by effectively diluting the shares of a
person or group deemed hostile to a company. They do so by distributing
many new shares to non-hostile holders, effectively diminishing the power
of stock held by the hostile party.
A source close to talks between
CA and Fidelity Investments, which owns around 10 percent of CA shares,
said in August that CA had committed to the new five-year expiration in
exchange for Fidelity's support in the proxy fight against tycoon Sam Wyly
this summer. CA denied ever having made such a promise.
Lisa Savino, vice president of
investor relations at CA, said yesterday the move was made in response to
"feedback from investors,” who made it "quite clear” they wanted the
poison pill reviewed.
Ram Kumar, who tracks Computer
Associates for Institutional Shareholder Services, an influential firm
that advises investment groups on proxy matters, said while CA might have
eliminated the poison pill sooner, "Five years is a lot better than 10.”
Gary Lutin, a Manhattan
investment banker who conducted a shareholder forum during the proxy
fight, said, "CA promised five years and they delivered. I'm really glad
to see they're delivering on their promises.”
Copyright © 2001,