Irving Rejects Bid and Strengthens Its ‘Poison Pill’

Irving Bank Corp. said that Friday its board of directors rejected Bank of New York’s sweetened bid and took steps to prevent the hostile suitor from acquiring a larger stake in the bank.

Meanwhile, both companies have turned to the courts for help in the bitter7-month-old battle.

In a special 2 1/2-hour meeting late Thursday, Irving’s board refused to rescind its “poison pill” takeover defense, a condition under which Bank of New York had proposed to raise the stock portion of its $1.1-billion hostile offer.

Instead, Irving said, the directors amended the defensive provision so that it would be activated should someone acquire at least 20% of Irving shares on the open market. The poison pill previously would have gone into effect in the event of a takeover not supported by management.

Bank of New York spokesman Owen Brady said: “The action taken by Irving’s board . . . is clearly invalid.”

The company said it asked the New York State Supreme Court on Friday to act quickly to invalidate Irving’s poison pill. A hearing was set for May 24.

Bank of New York had threatened to proceed with its original tender offer by Tuesday and run Irving as a subsidiary, provided at least two-thirds of Irving’s 18.5 million shares outstanding were tendered.

Irving’s management, meanwhile, supports a friendly merger with Banca Commerciale Italiana SpA, a major state-run Italian institution.

Poison pill defenses are designed to discourage takeover bids by greatly increasing the cost of an acquisition. In Irving’s case, existing shareholders would be permitted to buy stock in an acquiring company at about half price.

Brady said that as of Monday, Bank of New York held about 50% of Irving’s stock, including shares it owned or had been tendered to it.