West Point-Pepperell Adopts Severance Plan To Protect Employees In Takeover
ATLANTA (AP) _ Takeover target West Point-Pepperell Inc. has adopted a sweetened severance plan for almost 6,000 employees that provides increased benefits if they are fired within two years of a hostile acquisition.
A company official said Wednesday the plan has been considered for some time and is not a direct reaction to this week’s $1.4 billion bid for the west Georgia textile giant.
Chicago-based Farley Inc., one of the nation’s largest privately owned conglomerates, Monday announced a $48-per-share tender offer for Pepperell stock. West Point-Pepperell, the nation’s largest publicly owned textile and apparel company, has not responded, advising stockholders to await a board recommendation that is promised by next week.
However, employees were informed of the severance program Tuesday. D. Michael Roark, West Point-Pepperell vice president of human resources, said Wednesday the program had been adopted last week and was under consideration for some time.
″This is not something we did in response to Bill Farley,″ Roark said. William Farley heads the conglomerate which owns underwear manufacturer Fruit of the Loom and other companies.
″We had been talking (about the plan) in the management group for several months,″ Roark said in a telephone interview from the company’s West Point, Ga., headquarters.
″This was not, and we don’t now consider it, ‘shark repellent,’ ″ he said, referring to jargon used to describe tactics companies use to fend off corporate raiders.
A Farley spokesman said the company would have no comment on the provision.
Roark said the plan - which guarantees at least three-months pay to some 5,900 salaried and clerical employees - would not involve enough money to dissuade a suitor. However, he had no estimate on the amount of money involved, saying it would depend on how many employees were involved and their level of seniority.
The decision, however, fits in with a series of moves West Point-Pepperell has taken this year to strengthen its ability to fight a takeover.
In June, the company adopted a shareholder rights plan which would allow the board to issue a special class of stock as a dividend to current stockholders. The plan would take effect as soon as a tender offer is launched or if someone purchases 10 percent of its stock.
Farley notified the company in May it was seeking up to 25 percent of West Point-Pepperell stock and so far has spent $88 million for 9.8 percent of the stock.
Pepperell also has had in place for some time so-called ″golden parachutes″ for executives, including a $1.39 million payout to Chief Executive Officer Joseph L. Lanier Jr. if he were to be fired by new owners.
Those provisions have been challenged by Farley in federal court and by a Pepperell stockholder, who filed a suit in state Superior Court Tuesday, claiming stockholders are deprived of the highest possible stock price.
No action has been taken on either lawsuit.
West Point-Pepperell is one of the first companies in the state to take advantage of a new state antitakeover law adopted earlier this year and patterned after similar laws in other states.
The law, which took effect in March, limits a new owner’s ability to sell off parts of the company for five years.
The severance plan covers all salaried and certain skilled clerical workers, who Roark said in other places in the country likely would be salaried workers.
″If within two years of a change of control, an employee covered by the plan is terminated, they would receive the greater of two weeks pay per year of service or three months’ pay,″ Roark said.
″It institutionalizes the sort of severance payment that we consider fair and reasonable in any event. It’s about what we do now,″ he said.
″We felt that is was important that if we did change control ... some provision be in place to insure that (employees) were treated as fair by the new management as we would.″