Polaroid’s Rush on ESOP Illegal, Shamrock Claims

Shamrock Holdings on Thursday accused Polaroid Corp. in a court brief of adopting an employee stock ownership plan to protect the company from a takeover, claiming Polaroid’s own documents show that the company hurried to establish the plan in July before a “raider surfaces.”

The brief was filed during a Delaware Chancery Court trial in Wilmington, Del., where Shamrock is suing to scrap an employee stock plan that has given workers about 14% of Polaroid’s shares.

If upheld in court, the stock ownership plan could effectively kill Shamrock’s bid. Shamrock has called the plan illegal because it was set up for no reason but to thwart a takeover. Polaroid has countered that it was working on the stock plan before Shamrock surfaced during the summer as a suitor.

A Burbank investment firm owned by the Roy E. Disney family, Shamrock owns 6.8% of Polaroid and has launched a hostile $2.4-billion offer for the shares it doesn’t already own. Polaroid is a Cambridge, Mass., instant photography giant.

Separately, Polaroid said a hearing is scheduled next Thursday with the U.S. 3rd Circuit Court of Appeals in Philadelphia to appeal a federal judge’s decision clearing the way for Shamrock’s bid.

Polaroid, which has accused Shamrock of violating Securities and Exchange Commission rules in its bid, said it will argue that Shamrock’s $42-a-share tender offer violates SEC rules because it didn’t apply to shares held by the employee stock plan. It also said it will argue that Shamrock’s financial advisers, Drexel Burnham Lambert and Wertheim Schroder, are actually co-bidders, which should have been disclosed in offering documents.