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Borden adopts unusual poison-pill plan

By NENA BAKER, UPI Business Writer

NEW YORK -- Borden Inc. said Wednesday its top 25 managers made a pact to quit en masse if the company fell prey to a takeover that did not meet certain financial criteria and resulted in the ouster of any one of the group.

The plan, essentially a hybrid of a corporate poison-pill defense strategy and a golden parachute for company executives, involves the top two tiers of Borden's management ranks.

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It would go into effect if the price paid for the food and chemical company did not reflect at least 50 percent of what the buyer might achieve in a restructuring of the company, and the new owners changed the responsibilities or terminated any one of the management group within three years.

'Our leverage comes from a buyer losing the top managers in one fell swoop,' said spokesman Nicholas R. Iammartino. 'We think lenders would have to consider that as a risk factor.'

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Members of the group received a conditional stock option grant in return for signing the agreement, Iammartino said. But their employment contracts, which provide for severance pay equal to three years of salary and bonuses, were virtually unchanged.

The combined salary of group members, whose average length of service is 21 years, totals $35 million annually, said Iammartino.

To determine the company's value to a buyer, Borden's board of directors would consider, among other things, any benefits an acquiror would gain from the later sale of assets, reduction of overhead and consolidation of production, distribution or sales systems.

Borden, with revenues of $6.5 billion in 1987, is the nation's sixth-largest food company and 64th-largest industrial corporation.

'If an acquiror refused to pay our shareholders a fair price under this new standard, it would be difficult for him to restructure or sell off parts of the company for a period of three years,' said R.J. Ventres, chairman and chief executive officer. 'The moment he tried, he would lose the key operating management.'

Borden, the maker of Cracker Jack snacks, Elmer's glue and Creamette pasta, is considered a likely takeover target by some analysts because of its undervalued stock.

The food industry has seen its share of takeovers in recent months, with Kohlberg Kravis Roberts Co. agreeing to acquire RJR Nabisco Inc. for a record $24.88 billion and Philip Morris Cos. Inc. swallowing Kraft Inc. for $13.1 billion.

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Borden said the plan is not designed to prevent a takeover, but to get the most for shareholders if a sale should occur.

'The board's purpose is to ensure that current shareholders, rather than later speculators or acquirors, are the people who reap the full benefit of the strong company they have helped to build,' said Ventres.

Borden said the stragegy would not be put into effect if 85 percent of shares not already held by a buyer or by Borden directors or the senior management group were purchased for cash, regardless of whether the offer met the board's financial criteria.

Some analysts said the unusual strategy could not hurt the company, but may not prevent it from being taken over by a suitor who sought a restructuring.

'It's an innovative kind of plan,' said Marvin B. Roffman, who follows Borden for Janney Montgomery Scott Inc. in Philadelphia. 'But there isn't anybody who cannot be replaced.'

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