Pillsbury’s Use of ‘Poison Pill’ Again Upheld

A second judge Thursday left intact the “poison pill” defense that Pillsbury Co. is using to defend against an unsolicited $5.23-billion takeover bid from Grand Metropolitan PLC, but the judge urged Pillsbury to negotiate with the British suitor.

“The Pillsbury board must be left to do its own work, but it seems to this court that direct negotiations may be justified,” said Hennepin County District Court Judge Thomas Carey.

The request for an order forcing Pillsbury to drop its poison pill, or shareholders’ rights plan, and discuss the $60-per-share tender offer with Grand Met came from Pillsbury shareholders, who are represented in a class-action lawsuit against the food and restaurant company. Grand Met has said the poison pill makes a takeover of Pillsbury prohibitively expensive.

Board ‘Diligent’

Grand Met had asked for the poison pill to be dropped in a separate lawsuit, but that request was denied Monday by retired Justice William Duffy in Delaware Chancery Court. Duffy ruled that, as of Oct. 17, Pillsbury’s directors had not abdicated their responsibility to shareholders in rejecting Grand Met’s offer as “inadequate.”

Carey said Pillsbury’s board has been “diligent” in its handling of the takeover bid, but he restrained the company from raising legal issues such as state “tied-house” statutes to impede possible negotiations. Pillsbury has sued Grand Met in 14 states on grounds that a takeover would violate laws that forbid liquor distillers from selling alcohol at retail outlets.