MCA Raises Defenses Against Unwanted Suitors

MCA, in its first overt step to fend off a threat posed by New York real estate magnate Donald J. Trump, on Tuesday adjusted the hair trigger on its takeover defenses, empowering the company to move more quickly against an unwelcome suitor.

The Los Angeles entertainment company, owner of Universal Pictures and the Universal Studios tour, will now be able to act forcefully against companies or individuals buying 10% or more of its stock. A previous anti-takeover plan, adopted less than eight months ago, would have taken effect if a suitor bought 20% of MCA’s shares.

No reaction was immediately forthcoming from Trump, who notified the company last month that he might buy as much as 24.9% of its shares if he clears regulatory hurdles. In mid-February, Trump owned 375,000 shares, or less than 1% of the company’s 73 million shares outstanding.

MCA said the new mechanism is “designed to deal with the very serious problem of another person or company using abusive tactics to deprive MCA’s board and its stockholders of any real opportunity to determine the destiny of the company.”

However, the company said its board has determined that the new rules won’t apply to longtime Chairman Lew R. Wasserman and certain related trusts. Wasserman, who turns 75 in two weeks, owns about 7% of the company and wields some control over an additional 8% in various trusts.

Open to Cash Offer

Tuesday’s announcement was styled as an amendment to an anti-takeover plan--known as a “poison pill”--that allows MCA stockholders to buy their own company’s and the acquiring firm’s common stock at an exceptionally cheap price, thus making a hostile takeover prohibitively expensive. While many companies have such anti-takeover plans, their effectiveness remains uncertain in the face of legal challenges and Wall Street pressures to negotiate with a serious bidder.

MCA once again did not rule out the possibility of accepting a cash offer. In Tuesday’s statement, MCA reiterated that a bidder--as long as it owns less than 1% of the company’s stock and has not disclosed a plan that might influence corporate control--could call a shareholder meeting to vote on dissolving the poison pill plan. That would appear to preclude Trump, even though he owns less than 1%.

At the time of the original anti-takeover plan’s adoption last summer, MCA shares were trading heavily on speculation that a three-week hospitalization of Wasserman might make MCA vulnerable to a takeover. But Wasserman returned to work, and the wild trading subsided until last month, when Trump filed notice of his intentions with federal antitrust agencies in order to comply with the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

MCA announced the amended plan after the close of trading on the New York Stock Exchange, where MCA shares closed at $46.75, unchanged from the previous day. The volume was 320,700 shares, only slightly higher than Monday’s volume of 271,100 shares and far below the company record of 2.8 million shares that changed hands in a single day during Wasserman’s hospital stay. Nevertheless, the price of MCA shares has risen by more than 15% since Trump disclosed his holdings on Feb. 12.

No Comment

In New York, Trump aide Norma Foerderer declined Tuesday to comment on MCA’s action. She also declined to say whether Trump has sought an expedited ruling from the Federal Trade Commission or Justice Department, which routinely allows at least 30 days for a review of a contemplated merger.

MCA filed its response to the regulatory agencies just two days ago, according to company President and Chief Operating Officer Sidney J. Sheinberg, who declined any further comment on Trump or the amended shareholder rights plan.

Highlights of MCA’s current anti-takeover plan are as follows:

- If a suitor acquires 10% or more of MCA’s shares, stockholders would be able to exercise previously issued rights that allow them to buy MCA shares at a deep discount. If such an unwelcome merger took place, MCA stockholders would also be permitted to buy the acquiring company’s stock at a deep discount.

- In lieu of shareholders exercising such rights, the board of directors is empowered to act on its own if an unwelcome suitor acquires 10% (but before the suitor acquires 50%) of MCA’s voting shares. The board may exchange the rights for company stock at a ratio that would have “an economically dilutive effect” on the acquiring company. Such action would spare MCA shareholders the hassle and expense of exercising their rights, the company said.

- If a suitor crosses 10% as part of a cash tender offer for all of MCA’s shares and increases its stake to at least 80%, the rights plan would not be activated, the company said.