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Pepperell, Farley Proxy Fight For Board Set

December 19, 1988

ATLANTA (AP) _ Hostile suitor Farley Inc. has succeeded in forcing West Point-Pepperell Inc. to call a shareholders’ meeting to vote on a new board of directors, the threatened textile giant said Monday.

Pepperell said in a statement from its West Point, Ga., headquarters it had confirmed that holders of about 27 percent of the company’s common stock - including Farley’s 9.8 percent stake - had called for the meeting.

The Pepperell board was required to call the meeting if requested to do so by holders of 25 percent of its common stock. The statement said the board, which probably would meet later this week, was expected to schedule the meeting for Feb. 25.

On Oct. 25, Farley offered $1.4 billion, or $48 per share, for Pepperell, an offer which the company’s directors dismissed as inadequate. They claimed Farley’s bid was an effort to get the company before it could realize savings from a then-incomplete takeover of J.P. Stevens & Co. Inc.

Farley, the Chicago-based manufacturer of Fruit of the Loom underwear and Acme boots, asked other stockholders on Dec. 1 to join in requesting the meeting in an attempt to thwart management’s resistance to the tender offer.

Farley’s request for the meeting said it would propose to remove Pepperell’s 11 current directors, replacing them with an entirely new slate.

A Farley-backed board would be expected to rescind certain ″poison pill″ anti-takeover provisions from Pepperell’s bylaws that would increase the cost of the billion takeover attempt.

However, the scheduling of a meeting does not guarantee Farley’s efforts to oust the board would succeed. Farley still must seek support for its as-yet- unnamed nominees.

Farley spokesman Jack Albertine said Monday the company’s stake in Pepperell, plus shares already tendered to Farley, give the hostile suitor about 56 percent of Pepperell’s outstanding stock. However, the tenders do not carry voting rights.

Farley objects to recent changes in the bylaws that allowed management to purchase additional shares, resulting in a possible $1.9 million profit to Pepperell Chairman Joseph L. Lanier Jr. and $1.2 million to President Don J. Keller.

Other changes benefiting management, including so-called ″golden parachutes″ for directors, have ″effectively prohibited any acquisition proposal or tender offer which lacks management’s support, no matter how beneficial to shareholders,″ Farley’s request for the meeting said.

Farley also has filed lawsuits challenging Georgia’s anti-takeover statutes.

Pepperell, the country’s largest publicly held textile manufacturer, has countered with lawsuits claiming Farley’s bid violates security and banking regulations because it is financed with too much debt.

It also charges that Farley’s financial adviser, Drexel Burnham Lambert Inc., improperly has used information gained during Pepperell’s takeover this year of Stevens and that Drexel is a full-fledged bidder in the deal and has failed to disclose that to regulators.

A federal district judge has agreed with portions of both lawsuits, sending the case to the 11th U.S. Circuit Court of Appeals, where a hearing is scheduled Jan. 11.

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