Tessco adopts poison pill

Move counters takeover threat

February 02, 2008|By Tricia Bishop | Tricia Bishop,Sun reporter

Two months after an Indiana competitor spent millions acquiring a big chunk of Tessco Technologies Inc., the Hunt Valley company has struck back with a defensive move designed to shield it from a hostile takeover.

In documents filed yesterday with the Securities and Exchange Commission, Tessco outlined a stockholder "rights plan" that would allow shareholders as of Feb. 11 to buy a certain amount of stock at half price if anyone tries to obtain 20 percent of the business.

The proposal would make it more difficult and expensive to acquire the company, which makes products for operating and using wireless systems.

"The plan is designed to deter a potential acquirer from gaining control of the company through coercive takeover tactics," Tessco confirmed in a statement issued yesterday.

Tessco did not return a telephone call requesting further comment yesterday.

In November, Indiana-based Brightpoint Inc., which says it's one of the world's largest distributors of wireless phones and accessories, spent $7.3 million on 470,000 Tessco shares.

That made it the company's second-largest shareholder, with 9.12 percent of the stock, behind Tessco founder and Chief Executive Officer Robert B. Barnhill Jr. He holds more than 1.2 million shares, or 24.36 percent of the business (Barnhill's holdings trigger the rights plan if they reach 30 percent).

At the time, Brightpoint, which recently acquired two major rivals, said in an SEC filing that it was buying Tessco shares because they were undervalued and a good investment. The filing also said the company could talk with other investors and propose "changes to [Tessco's] capitalization, ownership structure or operations."

A year ago, Tessco shares were trading in the $25 to $30 range, but after the business announced a 53 percent drop in year-over-year profit in August, the price fell to under $10.

Shares have been trading in the mid- to high teens since September. Shares closed down 11 cents, less than 1 percent, to $18.30 on the Nasdaq yesterday, with the trading volume less than half the average.

Brightpoint Chairman and Chief Executive Officer Robert J. Laikin was traveling yesterday and unavailable for comment, spokesman Anurag Gupta said.

Tessco's stock rights plan is typically known as a "poison pill" and often is used by companies to ward off hostile takeovers.

Such plans can be controversial.

Shareholders don't like anything that lessens a company's value or "insulates managers from the vagaries of the marketplace," said Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

Tessco's plan was approved by its board of directors. Board members also amended the company bylaws for calling special shareholder meet- ings.

At least half the stockholders must call for a special shareholder meeting to be held. Previously, such meetings could be called by those holding a quarter of the stock.

tricia.bishop@baltsun.com

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