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Wolosky is suing Williams Cos <WMB.N> five months after the
energy company adopted a so-called poison pill, a takeover
defense tool designed nearly 40 years ago to keep hostile
bidders and activist investors at bay.
Wolosky filed the proposed class action suit in Delaware
Chancery Court this week not on behalf of a client but as the
plaintiff himself to force Williams to eliminate "an extremely
aggressive overreach of corporate power."
Williams, like dozens of other companies, raced to adopt poison
pills as protective measures when their stock prices cratered
along with oil prices and fuel demand this year during the
COVID-19 pandemic.
But Williams' pill raised eyebrows from the beginning with its
unusually low 5% threshold and a "wolfpack" provision aimed at
preventing investors from contacting other similarly minded
shareholders, governance experts said.
Wolosky's suit says the pill, designed to be in place until
March 20, 2021, serves no purpose now. Although Williams' stock
tumbled to $9.25 in March and lost half its value in the
sell-off, it recovered and closed at $21.07 on Friday. The
threat, Wolosky says "has long since evaporated and the
continued existence of the Pill can only be for entrenchment
purposes."
Williams said on Friday that it stands by its decision to adopt
the pill.
"During a time of unprecedented dislocation in equity market
valuations, the board acted to support the rights of
shareholders and maintain a fair value for their investment,
protecting against those who would seek short-term gains to take
advantage of market conditions at the expense of the company and
its long-term investors," according to an email from Williams
Media Relations.
Corporate governance experts said it is highly unusual for a
corporate advisor like a lawyer to take this kind of action.
"I don't know of a precedent for this, but that Steve Wolosky
himself is the plaintiff only adds gravitas," said Chris Cernich,
managing partner at Strategic Governance Advisors, which advises
companies facing activists.
Poison pills are generally frowned upon in the governance arena
for their dilutive effect on ownership and had been used
sparingly, reserved as emergency measures. But this year's
volatile markets brought them back.
Proxy advisory firm Institutional Shareholder Services
recommended in April that Williams shareholders not support the
company's board chair because of the "highly restrictive" nature
of the pill.
"There is great controversy around pills and they require
careful analysis and crafting to make sure they are not overly
restrictive," said Greg Taxin, managing director at Spotlight
Advisors, the leading adviser to companies and investors in
activist situations, according to FactSet Research Systems.
Wolosky, a partner at Olshan Frome Wolosky, is being represented
by Bernstein Litowitz Berger & Grossman LLP and Friedman Oster
Tejtel PLLC.
(Reporting by Svea Herbst-Bayliss; Editing by David Gregorio and
Sonya Hepinstall)
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