Judge Thwarts Pillsbury’s ‘Poison Pill’ Defense

Pillsbury Co. on Friday suffered a stunning defeat in its fight against an unwanted takeover when a Delaware judge struck down key portions of its anti-takeover strategy.

The judge said that Pillsbury, which is the target of a $5.5-billion takeover launched by Grand Metropolitan PLC, must revoke its so-called poison pill, which would have made a takeover of the food and restaurant company prohibitively expensive.

The Delaware court, as well as a separate court in Minnesota, also halted another of Pillsbury’s moves to fend off Grand Met: the spinoff of its ailing Burger King fast-food chain into a separate company.

Although Grand Met has received about 87% of Pillsbury’s shares, the British company said it would not actually acquire any of the stock until the Minneapolis-based foods company had revoked the poison-pill provisions.

Analysts were quick to praise the judge’s ruling, which came after the financial markets had closed. “Good for that judge--that’s corporate justice,” said industry analyst Roger Spencer at PaineWebber. “The bottom line is that this whole thing could have been resolved within the first days of the offer,” he said of the three-monthlong takeover effort.

Officials at Grand Met, a major British liquor, restaurant and gaming company, were more than pleased with the ruling and called upon Pillsbury to begin negotiations.

“Our overriding objective is to bring this transaction to a successful conclusion as a quickly as practical,” said Ian A. Martin, head of the firm’s American operations, in a statement. “The court’s decision against the poison-pill and spinoff enables us to move much closer to that goal.”

Pillsbury, whose executives were not available for comment, is expected to appeal the decision. But analysts remained confident that the decision will eventually lead Pillsbury to surrender to Grand Met.

“I’m just assuming it’s a done deal,” Spencer said.

In defending its anti-takeover plan, Pillsbury had argued that the defense protected the rights of minority shareholders who had not agreed to sell their stock to Grand Met.

But Justice William Duffy disagreed, saying the danger was not great enough “that it should deprive the holders of the 87% majority of their right to elect whether to accept or reject the Grand Met offer.”

Duffy also disagreed with Pillsbury’s view of the Grand Met offer, which was sweetened to $63 a share this week, as inadequate. In another development, Grand Met said it had acquired a company that operates 1,276 William Hill betting shops in Britain and Belgium for about $602 million.