Shamrock Sues to Block Polaroid Efforts to Avoid Hostile Takeover

Shamrock Acquisition III Inc. said today that it has filed suit to block Polaroid Corp.’s recapitalization plan, which appears designed to foil Shamrock’s $3.2-billion hostile bid for the photo company.

Cambridge Mass.-based Polaroid rejected last week a $45-a-share bid from Shamrock, which has pursued the company since July, calling the offer inadequate and not in the best interests of shareholders.

Under the recapitalization, announced Monday, Polaroid would buy back $1.1 billion of its common stock. It would finance the repurchase partly by issuing $300 million of convertible preferred stock to Corporate Partners L.P., a private investment fund formed by Lazard Freres & Co. to assist in defending against hostile bids.

Burbank-based Shamrock said it filed suit Monday against Polaroid, its board and Corporate Partners, asking the Delaware State Court to block the issuance of the stock to Corporate Partners and the $1.1-billion buyback plan.

The complaint alleges that Polaroid’s directors “breached their fiduciary duties by issuing additional dilutive voting securities to persons friendly to management in the face of Shamrock’s announced intention to wage a proxy contest at Polaroid’s upcoming annual meeting.”

Shamrock has said it will pursue its takeover effort through a proxy fight at Polaroid’s annual meeting in May, when all 12 board seats are up for election.

$52-a-Share Bid Considered

Shamrock said it asked the court to prevent two Corporate Partners representatives from being placed on Polaroid’s board, to block the exercise of any voting rights of the preferred shares and to prevent implementation of the repurchase plan.

Polaroid confirmed reports on Monday that it is considering paying as much as $52 each for 20 million of its shares in a self-tender. That would represent about 28% of Polaroid’s 71.6 million outstanding common shares.

Through such a buyback, Polaroid would push up the price of its shares, making it more difficult for Shamrock to acquire the company without raising its own bid.