Corporate Raider Holds 6.4% Stake in Firm : Shaklee Toughens Its Anti-Takeover Defenses

Responding to word that corporate raider Irwin Jacobs has accumulated more than 6% of its stock, San Francisco-based Shaklee said Wednesday that it has toughened its anti-takeover defenses.

Shaklee, which sells vitamins and household and personal-care items through a direct sales network, said its directors amended a shareholder rights provision that makes it even more difficult to launch a hostile takeover attempt.

Jacobs, a Minneapolis financier with a reputation for making takeover bids, said in a Nov. 28 filing with the Securities and Exchange Commission that he had acquired 6.4% of Shaklee’s outstanding shares during the month of November.

The SEC filing noted that Jacobs could sell his Shaklee stock or buy more.

Jacobs could not be reached for comment Wednesday.

The new provision adopted by Shaklee’s board gives other shareholders the right to buy company stock at a 50% discount if an unfriendly bidder acquires 15% of the outstanding shares.

Previously, an unfriendly bidder could trigger the discount sales provision by acquiring a 20% stake.

A Shaklee shareholder recently filed a suit challenging the legality of such discount sales mechanism.

Robert Gunst, Shaklee’s senior vice president and chief financial officer, said management is optimistic about results for 1988. Shaklee had earned $12.9 million on sales of $431.7 million through the first three quarters of the year, down from earnings of $14.5 million on sales of $391 million for the same period last year.

In the past, Jacobs has accumulated shares of companies only to sell off his stake at a profit without launching a formal takeover bid, and he has also provoked some of his targets to buy back his stock at a substantial premium.

Jacobs could be planning to do the same thing with Shaklee, according to Diana Temple, an analyst at the Salomon Bros. investment firm.

“Until I see it (a takeover bid), I won’t believe it,” she said.

Temple and other analysts said Shaklee is attractive partly because it has a strong sales force in Japan, which produces about 50% of its sales.

Analyst Gerald May at Paine Webber said Jacobs may want to sell parts of Shaklee if he were to acquire the firm.

Many investors would be interested in a Shaklee subsidiary that owns Harry & David, a large direct mail marketer of gourmet food, May said.