2nd UPDATE: Abercrombie Delays Vote On Reincorporation Plan
February 28 2011 - 3:19PM
Dow Jones News
Abercrombie & Fitch Co. (ANF), facing resistance to its plan
to reincorporate in its home state of Ohio, delayed a special
meeting of shareholders it had scheduled for Monday, in order to
drum up enough investor support for the move.
The teen retailer said in a proxy filing on Monday that it was
"convinced" it had strong support for the move after "a succession
of positive communications with a number of significant
stockholders." But, general counsel Ronald Robins said, it has
"been unable to obtain a strong consensus in favor of
reincorporation at this point."
Robins in an interview with Dow Jones Newswires said there is no
timetable to reconvene the meeting, and the company will either
call a new special meeting, add the vote to the slate of proposals
at its annual meeting or scrap the reincorporation vote if it can't
get the support it desires. He said there is a possibility that
Abercrombie could get the proposal to pass today, but it would be
just barely, and Abercrombie's goal isn't to "squeak by," but to
get a consensus approval.
If it reincorporates in Ohio, Robins said the company will drop,
with no intention to ever reinstate, its longstanding "poison pill"
antitakeover defense, a protective vestige of the bylaws it had
when first was spun off from its former parent in the late 1990s.
In any event, it will still ask holders to approve the
de-staggering of its board, considered another shareholder-friendly
measure.
A vast majority of major, public U.S. companies incorporate in
Delaware, a state known for its expert corporate-law judges, who
strike a balance between protecting shareholder rights and allowing
a company's independent board of directors to make difficult
decisions unfettered.
Abercrombie has cited several reasons for the move to its home
state, namely saving money on Delaware filings, a commitment to
Ohio, saving as much as $180,000 in annual tax liabilities and the
ability to attract directors and alter its corporate governance in
a way it says "protects and benefits the company and its
stakeholders."
The company has faced criticism for its plan including from
former lawyer and current law professor Steven Davidoff, who writes
for the New York Times's Dealbook Web site under the moniker Deal
Professor. He cites provisions in Ohio law that could either make
it easier for management to buy the company or make it harder for
suitors to acquire the company, both to the potential detriment of
stockholders.
Proxy advisory firm ISS had similar criticisms of the move's
effect on shareholder rights.
Abercrombie addressed at least part of Davidoff's criticism in a
Securities and Exchange Commission filing last week, declining to
comment on "rumors or speculation" about a management buyout, but
noting that its proposal followed "well over a year and a half" of
review. It added that another proxy advisory firm, Glass Lewis
& Co. said recently that the move brings "positive changes to
shareholders," and opined that "the positive aspects of the
reincorporation greatly outweigh the negative provisions."
Robins said that, whether as a result of press criticism or
other reasons, some holders that had once supported the
reincorporation now oppose it, including one hedge fund he declined
to name. Abercrombie is prepared to make changes to its proposal,
he said, which could change how the company will deal with certain
Ohio law provisions that make the balking shareholders uneasy, and
it intends to have further discussions with them.
For example, he said Abercrombie would waive certain Ohio
regulations which prohibit voting by merger arbitrageurs and others
who accumulate large stakes after prospective takeover bids are
announced.
"I don't think this is a shareholder friendly move," Brian
Sozzi, an analyst with Wall Street Strategies, said of the current
plan. Nonetheless, even though the tax and other cost savings
associated with the move appear small, they are consistent with
Abercrombie's cost-cutting regimen, which Sozzi said is aimed at
helping it achieve its "ambitious" target for operating profits
next year.
Abercrombie and peer American Eagle Outfitters Inc. (AEO) are
among the names often speculated as potential targets, particularly
following a $3 billion takeout bid for rival J. Crew Group Inc.
(JCG) in November from a team that includes its chief
executive.
Robins said the negative press received by the J. Crew deal
could be another reason that holders once for the reincorporation
have since changed their minds.
Shares of Abercrombie were up 32 cents at $57.13 in recent
Monday trading and are up almost 57% over the past year.
-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171;
maxwell.murphy@dowjones.com
--Lauren Pollock contributed to this article.
J Crew Grp. (NYSE:JCG)
Historical Stock Chart
From May 2024 to Jun 2024
J Crew Grp. (NYSE:JCG)
Historical Stock Chart
From Jun 2023 to Jun 2024