United Grain Growers Ltd. will not go gentle into that good night.
The embattled grain company, the subject of a hostile takeover bid by Alberta Wheat Pool and Manitoba Pool Elevators, has fought back with poison pills, legal manoeuvres, rosy financial forecasts and strong words.
“We are in fighting form,” said chief executive officer Brian Hayward.
After weeks of refusing to comment on rumors swirling around his company, Hayward held little back in an interview the day after the pools announced their offer to purchase all of UGG’s shares for $13.75.
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Describing the price as “totally inadequate” and an attempt to “steal the company,” he had harsh words for the manner in which the pools quietly acquired nearly 15 percent of UGG’s shares before announcing a full-scale takeover bid.
“We think the process they have used is oppressive to the other shareholders and we don’t like it one bit,” he said.
At the same time, he said, UGG’s directors and management have always recognized their shares, which are sold on the Toronto Stock Exchange, are fair game for any buyer.
“When we became a publicly traded company we began to contemplate the kind of things that might happen to us,” he said, adding the company was not caught off guard by last week’s developments. “We know what we’re doing. We’ve had a very thorough grounding as to what our responsibilities are and what we need to do.”
The company has urged individual shareholders to reject the pools’ offer, pointing to a commentary from investment analysts at Scotia Capital Markets setting a target price for UGG shares of $18.50 and recommending that investors buy stock in the company.
The target price is based largely on the expectation that another bid will be made for UGG.
“We believe that a competing bid is a high probability,” said analyst Steven Holt, adding the $18.50 target is based on a 75 percent probability of a competing bid of $17 a share.
Hayward cast some doubt on that scenario, saying “we are not aware of any pending bid, foreign or otherwise,” for UGG.
Poison pill
Undoubtedly the most deadly weapon in UGG’s armory is the so-called poison pill contained in its recently adopted shareholders rights plan and scheduled to go into effect March 4.
Under the plan, if a company acquires more than 15 percent of UGG shares without meeting certain provisions of the plan, it triggers a clause (the poison pill) which allows all shareholders other than the pools to buy a huge number of additional shares at a drastically discounted price.
Analysts say poison pills are usually designed to buy time for a company facing a hostile takeover bid to seek out a rival friendly bidder and gain a higher price for shareholders. Others say they are designed to save management jobs and unfairly deny shareholders the right to dispose of their holdings.
In this case, the poison pill provision would substantially reduce the pools’ ownership stake in UGG. The pools say they own 14.98 percent of UGG’s share and have another 6.4 percent in a “locked-in agreement.” UGG says that means they own more than 15 percent, the pools disagree, and their lawyers are trying to sort it out.
Pool officials have appealed to UGG’s board to waive the poison pill, saying it prevents investors from selling their shares for a price that is roughly double what the stock traded for throughout 1996. They also say if they are forced to abandon their bid because of the provision, they will sue UGG.
