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CA Keeps Promise, Shortens Poison Pill Expiration

By Mark Harrington
Staff Writer

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.”

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