Davis Modifies Suit on NWA Takeover Defense
Billionaire Marvin Davis today revised his lawsuit challenging the “poison pill” takeover defense of NWA Inc., the Northwest Airlines’ parent company he wants to buy in a $2.7-billion hostile tender offer.
The lawsuit in the Court of Chancery in Wilmington, Del., originally sought to invalidate the pill. But at a hearing today, lawyer Gilchrist Sparks said Davis is asking only for the elimination of a provision that would prevent a new board of directors from dismantling the pill for 180 days.
Davis has launched a proxy fight to take control of the board of directors at the company’s May 15 annual meeting. If he were to succeed, a provision in the “poison pill” plan would prevent the new board from dismantling the takeover defense for 180 days.
Such a provision would cripple the new board from accepting legitimate buyout offers, thus hindering Davis’ proxy fight, Sparks said.
“Six months is a very long time,” Sparks said. “Stockholders want to get the money now, not in six months. So they will vote for whoever will get them the money now.”
Chancellor William Allen said he would rule soon on the request.
Sheldon Raab, a lawyer for Northwest, objected to the request. He said the 180-day waiting provision “has the purpose and effect of getting would-be acquirers (such as Davis) to come to the board and negotiate.”
It is a way of “buying time to get higher bids, explore alternatives to get maximum shareholder value,” Raab said. “The job of a corporation’s director is not to shoot himself and his shareholder in the foot,” but to make a “deliberated” decision on their behalf.
Meanwhile, Northwest Chairman Steven G. Rothmeier says he would like a “white knight” investor to come forward and work with current management if Northwest Airlines cannot remain independent.
Rothmeier told the Wall Street Journal that the best course would be for the company to remain independent and follow the growth strategy he has charted for the nation’s fourth-largest airline. But he said the company is exploring putting a large stake in NWA in the hands of friendly investors.
“There are potentially friendly investors out there,” said Rothmeier.
Davis’ tender offer stands at $90 a share even though the stock has been trading well above that price. NWA stock closed Friday at $102.50 on the New York Stock Exchange, up $3.75.
