With an agreement that neatly organized control of Maple Leaf Foods set to die Wednesday (June 30), the company has put a poison pill policy in place to buy time against any unexpected takeover bid.
Pending shareholder approval, the Toronto-based food processing giant on Tuesday announced it had adopted the new policy, which it, like most publicly traded companies, officially describes as a “shareholder rights plan.”
Maple Leaf emphasized Tuesday that the new rights plan is not a response to any “actual or anticipated transaction.”
A poison pill, if triggered by an unasked-for takeover bid, automatically floods the market with cut-price shares that are offered to every shareholder other than the unsolicited bidder, thus diluting the unasked-for bidder’s stake.
In Maple Leaf’s case, the company would “swallow” this pill by issuing new shares at a 50 per cent discount from the publicly traded share price, if any unsolicited shareholder buys up more than 20 per cent of Maple Leaf’s publicly traded shares.
The poison pill policy takes effect “immediately” and is meant to give Maple Leaf’s board and shareholders “sufficient time to consider fully” any bid or proposed bid involving 20 per cent or more of Maple Leaf’s outstanding voting common shares, as well as to consider “any alternatives.”
The poison pill plan has a three-year term but would expire on the six-month anniversary of its adoption if shareholders don’t approve it between now and then, Maple Leaf said.
The plan allows for a “permitted bid” as long as it’s made to all holders of Maple Leaf’s voting common shares and is open for acceptance for at least 60 days.
If at the end of 60 days at least 50 per cent of the outstanding voting common shares, other than those held by the bidder, have been tendered, the bidder can take up and pay for the shares but must extend its bid for 10 more business days to allow other shareholders to tender.
Tuesday’s statement follows an announcement last July that the Ontario Teachers Pension Plan Board, one of Maple Leaf’s two biggest shareholders, had given its year’s notice to end its 2001 shareholder agreement with McCain Capital Corp.
Teachers and McCain Capital each own about a third of Maple Leaf.
Maple Leaf’s announcement Tuesday stipulates that neither of those two major owners would trigger the poison pill, as long as neither moves to increase its own ownership stake, unless it’s through the “permitted bid” option.
The two major shareholders’ previous agreement called for McCain Capital’s nominees to take three seats on Maple Leaf’s 15-member board of directors, while Teachers’ nominees got two.
The nearly-expired deal had also stipulated the company’s CEO and seven directors were to be “mutually agreed to” by the two shareholders, Maple Leaf said at the time.
Media reports earlier this month, citing unnamed sources, have claimed Teachers has plans to sell its Maple Leaf stake, worth an estimated $450 million. Teachers has made no official comment either way.
Maple Leaf in 2009 finished a three-year restructuring of its meat (“protein”) operations and refocused itself on higher-margin consumer packaged products, such as prepared meats, meals and baked goods.
Said restructuring included putting its Burlington, Ont. pork plant up for sale, shutting its pork plant in Saskatoon and cancelling plans for a new facility there, with the goal of meeting all of the company’s fresh pork needs through its slaughter and processing plant at Brandon, Man.
Maple Leaf had launched the formal process to put the Burlington plant up for sale in the summer of 2008, expecting to complete a deal by the end of that year. It then put off the sale process in April 2009, citing “no immediate urgency,”
Maple Leaf then restarted the sale process for the Burlington plant in May this year, saying it was “reinvigorating the sale process following renewed interest, including the potential of completing a sale to a producer group.”
The company also appears to have weathered a significant outbreak of listeriosis that started in the summer of 2008 and was tracked back to one of its Toronto meat processing plants. Maple Leaf has since drawn praise in the business press for its up-front handling of the outbreak.