Care Enterprises Tries ‘Poison Pill’ to Block Takeover

Less than two months after being hit with an unsolicited and unwanted takeover campaign, directors of Care Enterprises Inc. have adopted a “poison pill” shareholder-rights plan to thwart the hostile acquisition of the Laguna Hills nursing home operator.

A company official said the plan was not directed specifically at Southmark Corp. of Dallas and former director Ted Nelson, who have teamed up in the takeover bid.

But in a statement, the company described the move as a bid to “deal with unilateral and self-dealing actions and other unfair takeover tactics.”

In May, Nelson, who has been feuding with company officials for a year, gave the voting rights to the 23% of Care Enterprises shares that he controls to Southmark in exchange for a $7.3-million loan. That deal valued Nelson’s shares at $4 each.

However, Care Enterprise shares trade in the range of $3.125 to $3.25 each.

Company officials said the new shareholder-rights plan would ensure that all stock owners are treated alike, and that all would get the same price if the company is sold.

“There would be no special deals,” said Richard Lazarnick, Care Enterprises’ vice president of marketing.

The plan calls for the company to issue one preferred stock purchase right for each share of common stock held as of the close of business July 14. For each right, a shareholder would be entitled to buy 1/100th of a share of a new series of “junior participating preferred stock” for $20. The rights would entitle shareholders, except those belonging to the hostile group, to buy more Care Enterprises stock at half-price.

The rights could be exercised only if a person or group acquires ownership of 25% of the company’s Class B common shares or if a group affiliated with Nelson, or either of the remaining two principal shareholders, acquires ownership of 35% of those shares.

Nelson and Southmark could not be reached to comment on Care Enterprises’ action.