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UTILICORP UNITED INC.
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Investor Relations
BOARD RECOMMENDS SHAREHOLDERS
APPROVE PROPOSALS FOR COMPANY STABILITY
- -- THE MEASURES LIKELY WILL FACE OPPOSITION FROM BIG INVESTORS.
In proxy statements sent to shareholders and employee-shareholders in mid-
March, UtiliCorp proposed four measures that would make it tougher for other
companies to acquire UCU and gain control of its operations.
"We want to be a survivor," says Dale Wolf, vice president of UCU
Corporate Finance. "These anti-takeover measures are one of the best ways to
make sure we aren't gobbled up."
The UCU Board of Directors unanimously recommends that shareholders vote
'yes' for all proposals on the ballot. Management believes the proposals are in
the best interest of employees, shareholders, customers and overall company
stability.
Although similar defense measures are in place among many other companies,
the proposals' approval is far from guaranteed. Wolf points to some hurdles for
UCU:
MORE "YES" VOTES NEEDED. Each of the four measures requires approval from
shareholders representing a majority of OUTSTANDING (or existing) shares.
That's different from typical UCU proposals, in which approval is needed by
just a majority of shares VOTED. So, regarding the anti-takeover proposals, a
shareholder who doesn't return their proxy in essence is counted as a "no"
vote.
To help get the measures approved, UCU plans to contract with a New York
City firm to call shareholders and encourage their support. UCU used the same
approach to win shareholder approval for the proposed merger with Kansas City
Power & Light Co.
INSTITUTIONAL OPPOSITION. Pension funds and other investors from the
institutional segment tend to be more interested in short-term gains than long-
term well-being of a company. Thus they typically vote against anti-takeover
efforts, believing that any takeover attempt will drive up the short-term share
price of a targeted company. Many large companies that have lots of
institutional investors don't even attempt to pass anti-takeover measures
anymore, realizing the resistance they would face from that sector.
Fortunately for UCU, retail "mom and-pop" investors represent a
substantial portion of the company's shares - about 70 percent - and they're
more likely to vote in line with a board of directors' suggestions.
While they may seem harsh, Wolf says the four proposals are needed in
today's business environment.
"We really have a challenge before us, but now is the time to do this," he
says. Why? He notes UCU's strong stock performance may make shareholders more
willing to approve the plans. Also, the pace of industry acquisitions and
mergers is expected to continue for at least several more years .
And if the company still is targeted by an unwanted suitor, Wolf says the
defense measures would give the board more room to negotiate better terms for
shareholders and the company.
Sidebar
A SUMMARY OF UCU'S ANTI-TAKEOVER STRATEGY
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UtiliCorp's four anti-takeover proposals are numbered five through eight
in the 31-page proxy sent to shareholder and employee-shareholder homes last
month. In essence, they would give UCU more flexibility to fend off a hostile
takeover through a series of defenses:
PREFERENCE STOCK (item 5). The measure would allow the board of directors to
give voting rights to people holding preference stock. Doing so gives the board
more flexibility and creates voting impediments to a would-be acquiror.
SPECIAL MEETING (item 6). It would increase the number of outstanding shares
needed to call a special meeting, preventing a small number of shareholders
from calling the meeting as a way to make proposals that could be disruptive
to UCU operations.
CUMULATIVE VOTING (item 7). By eliminating cumulative voting, the measure would
prevent shareholders from stacking their votes in favor of a board member who
supports the wishes of a minority of shareholders - such as those favoring a
hostile takeover.
BOARD MEMBER REMOVAL (item 8). It would prevent a takeover bidder that had
acquired a majority of UCU shares from removing board members opposed to the
takeover.
QUICK FACTS
Number of UCU shareholders: 85,000 (approximate)
Number of UCU outstanding shares: 53.7 million
Employee ownership of UCU stock: 12%
UCU's average proxy return rate from shareholders: 83 %
