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Subject:  Re: Poison Pill Puzzle Date:  2/19/2002  1:31 PM
Author:  TWA40 Number:  171 of 297

Current CEO - Poison Pill, MBO, White Knight, Hostile Bid
Former CEO - MBO, Poison Pill, White Knight, Hostile Bid
Large Stockholder - White Knight, MBO, Poison Pill, Hostile Bid
2 Outside Directors - Hostile Bid, White Knight, MBO, Poison Pill

Q1: Can the hostile bid succeed?

Not with the first 3 board members ranking it last of the 4 options. To succeed, the raiders have to convince the large shareholder to change his preferences (i.e. up the bid), or buy out management.

Q2: Can the poison pill succeed?

Only by surviving until the final vote versus the hostile bid. Voting White Knight against MBO would eliminate MBO, but the second round of White Knight vs. hostile bid favors White Knight. White Knight would have to be pitted against all remaining options to be deleted in round 2.

Q3: What should the outside directors do to ensure some type of buyout?

First vote on the Poison Pill versus any type of buyout. Four voters prefer MBO to the Poison Pill, and 3 prefer the White Knight option.

It's clear though that he who controls the proxy machinery and/or the voting process in board meetings has the deck somewhat stacked in their favor.

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