Directors of software giant CA Inc. adopts poison pill provision

The directors of software giant CA Inc. unanimously adopted a poison pill provision, the company announced Monday in a sign that the company believes it's a hostile takeover target.

The company said the "Stockholder Protection Rights Plan" isn't in response to a specific bid from an outside company, but it added that the bylaw "is not intended to prevent a takeover at a full and fair price." The board said it will let CA shareholders vote on the plan at the 2007 annual meeting.

Poison-pill provisions are designed to make hostile bids prohibitively expensive by dramatically increasing a company's stock price in the event of an unsolicited offer.

Neil Kaufman, a securities attorney with Davidoff Malito & Hutcher in Garden City who's written poison-pill provisions for public companies, said corporations adopt protection-rights plans when they believe they're susceptible to outside bids, not when a proposal has already been laid on the table.

"If you adopt it after there is [an offer], it gets held to a higher level of judicial scrutiny," he said.

Kaufman said the "very arcane" bylaws have never actually stopped a company from being acquired, but they give boards of directors greater leverage in negotiations.

"It empowers them to obtain a better price," Kaufman said.

Islandia-based CA, the former Computer Associates International, has been seen a possible takeover target following a series of accounting and corporate-governance scandals.

CA stock (NYSE: CA) closed up 6 cents to $23.94 per share in Monday trading.

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