Cummins Engine Bolsters Its ‘Poison Pill’ Defense

Cummins Engine Co., fighting the latest potential takeover threat against the diesel engine maker, said Wednesday that it has amended its “poison pill” defense, making its shareholder rights plan easier to exercise.

Under the plan, Cummins directors may grant shareholders the right to purchase new shares for $1 each if someone acquires 15% of the company’s stock.

Formerly, the rights plan, which could make it prohibitively expensive for a raider to acquire Cummins, could not be exercised until an investor held 25% of the company’s stock.

Late last month, the Hong Kong-based investment company Industrial Equity (Pacific) Ltd. said it had acquired 10% of Columbus, Ind.-based Cummins.

Although the group said it purchased the holding for investment purposes only, Wall Street analysts said they considered the stock “in play” as a potential takeover target.

On July 17, descendants of Cummins’ founding family acted to preserve the company’s independence by paying a $5-million premium for a nearly 10% stake held by Hanson PLC, the acquisitive British conglomerate.

The move was considered unusual because Hanson had not indicated any takeover intentions, and the company’s management had not sought the family’s assistance.