Polaroid Shareholder Move Ended Threat : Agreed to Distribute Gains to Block Takeover by Shamrock

Polaroid Corp. said today that it formally ended an eight-month takeover siege by Shamrock Holdings Inc. with an agreement to distribute to shareholders at least 25% of the proceeds of a massive lawsuit with Eastman Kodak Co.

Polaroid’s stock dropped sharply on the news, trading down $5 at $35.375 on the New York Stock Exchange by noon. The Polaroid shares had been expected to drop even before the agreement was announced, because Shamrock late Thursday lost its final legal appeal to keep the proposed takeover going and said it would sell most of its shares of Polaroid back to the company.

Polaroid, as part of its agreement, said it bought $5 million worth of advertising on Shamrock’s radio and television stations and paid Shamrock $20 million to partly cover its legal fees.

“Shamrock took green mail,” complained one arbitrager, noting the $20 million in expense money and $5 million in advertising amounted to a benefit received by no other shareholder.

In return, Burbank-based Shamrock, which is controlled by investor Roy Disney, agreed to terminate its tender offer and proxy contest and not to attempt to acquire control of the instant photography company for 10 years.

The 59-year old nephew of Walt Disney had talked of plans to revitalize Polaroid, a one-time Wall Street favorite that slipped into lackluster results in recent years. Disney’s group had sparked just such a turnaround at Walt Disney Co. in the 1980s. But the new agreement puts Disney out of the picture at Polaroid.