Prudential Adopts a ‘Poison Pill’ Defense

Prudential Securities adopted a “poison pill” defense Friday to try to ward off a hostile offer for its troubled Energy Income Funds series of oil and gas limited partnerships.

Resorting to the kind of tactics used in the heyday of 1980s takeover battles, Prudential imposed a “rights plan” that would instantly make the pending tender offer by Oklahoma investor George B. Kaiser unprofitable to Kaiser.

The partnerships are at the center of a mammoth legal battle in which Prudential customers are suing the firm on claims of fraud and misrepresentation in the sale of the partnership interests during the 1980s. Prudential has denied any wrongdoing.

Prudential is considering at least two other bids for the partnership interests, both said to be well in excess of the Kaiser offer. The Kaiser offer was recently raised to $283 million for 30 of the 35 Energy Income Funds partnerships.

Prudential said the strategy would make it possible to conduct an orderly sale of the partnership interests and ensure that investors get back more money than under the Kaiser offer. Prudential’s plan would force Kaiser to pay limited partners a huge sum of cash beyond his $283-million offer.

Dale McDoulett, manager of strategic ventures for Kaiser’s Kaiser-Francis Oil Co., said late Friday that the firm had not been notified of Prudential’s defensive move and had no immediate comment.

Prudential is also taking action in federal court to try to block the Kaiser bid.