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For CA management's 2001 proxy contest commitment to allow the old poison pill to expire in 2006, see:




CA Adopts Poison Pill Plan

By Bill Snyder Senior Writer
10/16/2006 5:40 PM EDT
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CA (CA) has adopted a new poison pill plan, the troubled software company announced after the market closed Monday.

As is customary, CA denied that the plan has been adopted in response to a specific takeover threat. According to legal precedent, takeover defenses adopted after a tender offer is in place may not enforceable.

Poison pills, also known as shareholder rights agreements, generally work by diluting the voting stock held by the attacking party. This is accomplished by issuing additional shares to friendly shareholders.

Among other provisions, CA's plan adopted raises the threshold of implementation to 20% of shares outstanding from 15%. The higher trigger level is likely a provision to accommodate CA's largest single institutional shareholder, Private Capital Management, which owns just under 13% of the company, and was in the awkward position of possibly triggering a poison pill as a result of routine trading activity.

Private Capital, say sources familiar with CA, has consistently supported the company's scandal-plagued management.

The plan must be approved at the company's annual shareholder meeting in 2007. Shareholders of poorly performing companies rarely approve poison pills, since the device makes a sale and subsequent stock appreciation, less likely.

Indeed, five years ago, in the midst of a takeover fight against corporate raider Sam Wyly, the company reportedly negotiated voter support for the incumbent board by committing to let the existing poison pill expire in 2006. But the agreement announced today may violate the spirit -- if not the letter -- of that agreement, say CA critics.

"I don't think anyone in 2001 thought that the bargain for their votes was simply to replace the old pill with a new pill," says Gary Lutin, an investment banker who runs a forum for CA investors. "Given the company's recent performance, I don't see how it would benefit shareholders to create obstacles to an acquisition."

CA has struggle to remove the stain of a $2.2 billion accounting scandal that resulted in felony convictions of a number of former top officers, including ex-CEO Sanjay Kumar. Even with a new management team in place, CA has not met investor's expectations recently and its stock is off 15% this year. By way of contrast, the Nasdaq is up 7% and the Goldman Sachs Software Index has appreciated by 12% in the same period.

Shares of CA closed Monday up 6 cents to $23.94.



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