Allied OKs anti-raider provisions 'Poison pill' makes takeover expensive

June 12, 1991|By Kim Clark

The directors of Allied Research Corp., worried about a Saudi Arabian investor's threats to take control of the company, have adopted "shark repellent" provisions to fend off hostile raiders.

Richard Farrell, spokesman for the small Baltimore-based defense contractor, said yesterday that the board approved the plan, also known as a "poison pill," to guarantee that all Allied's shareholders get a good price for their investment and are treated fairly.

Mr. Farrell said that the new provisions, which would make a takeover of Allied that was not approved by the company's management extremely expensive, were similar to anti-raider tactics already adopted by hundreds of other U.S. companies.

Allied's stock languished during its money-losing years of 1987-1989 but has been booming since late last year, when it started winning multimillion-dollar production contracts for its armor-piercing tank ammunition.

Allied has only a small, four-person headquarters office in Baltimore, although it has 600 employees worldwide.

The adoption of the anti-raider provision comes less than two weeks after Kusai H. M. Al Azzawi told federal regulators he wanted to put his own managers in charge of the company.

Mr. Azzawi, a businessman based in Riyadh, Saudi Arabia, has bought more than 300,000 shares of Allied stock in the last few weeks, increasing his holding from 15 percent to almost 22 percent of the company. Mr. Azzawi is now Allied's single largest investor.

Though he failed to show up at the company's annual meeting, which was held here late last month, and has not followed through on indications he wanted to replace board members, Allied's current directors wanted to make it tough for anyone to buy a controlling interest, Mr. Farrell said.

According to the company's attorney, John F. Bales of Philadelphia, Allied shareholders will be issued rights to buy additional shares for half their market value if a raider buys more than 25 percent of the company's stock. By issuing more shares to the remaining stockholders, Allied will be raising the cost of a hostile takeover, Mr. Bales said, explaining that "this is the poison in the pill."

If Allied's board approves of a takeover attempt and price, the board can rescind the rights for a penny apiece, essentially neutralizing the poison pill.

Mr. Azzawi could not be reached yesterday.

Another big Allied stockholder said that he liked the move.

Eric Ryback, portfolio manager for Lindner Management Corp., a St. Louis-based mutual fund that holds about 15 percent of Allied's stock, said that Mr. Azzawi's actions have "created a lot of uncertainty . . . and frustration."

Mr. Ryback said his fund thinks Allied "has tremendous potential" and doesn't want to see a change in management.

Allied's stock rose in over-the-counter trading yesterday, closing at $12.625, up 50 cents.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.