HILLS BOARD ADOPTS A POISON PILL PLAN

Byline: Carol Emert

WASHINGTON--The directors of Hills Stores Co., Canton, Mass., unanimously approved a poison-pill provision to prevent a hostile takeover by Dickstein & Co. L.P., the retailer announced Wednesday.
The company, which emerged from bankruptcy last October, also reported operating earnings more than doubled in the second quarter ended July 30 to $5.5 million from $2.6 million a year earlier, on a sales hike of 5.1 percent.
The shareholder rights plan adopted Tuesday by Hills' eight-member board does not rule out a takeover, but it is meant to insure favorable terms for other stockholders: Namely, Hills wants Dickstein to pay a premium for its proposed purchase of at least 50 percent of Hills' stock.
"The plan adopted by the board has been designed to protect our shareholders from coercive takeover tactics," said Hills president and chief executive officer Michael Bozic in a statement. "Neither Dickstein nor any other person should be permitted to accumulate shares without paying a control premium."
Dickstein, which owns 12.6 percent of Hills' stock and 9.2 percent of its voting stock, proposed in documents released Wednesday that Hills purchase 5.5 million of its own shares for $27 per share. It also named four directors it is seeking to remove, and four proposed successors.
The poison pill was adopted after the board learned that Dickstein had been granted government approval to buy the retailer. That decision was announced Wednesday morning by the Federal Trade Commission, which evaluates mergers for antitrust violations.
The pill would kick in when any shareholder's stake exceeded 15 percent. All shareholders, except for the 15-percent owner, would then have the right to purchase additional shares. A Hills spokesman said it is "a very flexible pill," explaining: "It says, in essence, 'If you want to buy the company, you have to come and talk to the board; you have to be fair to everyone."'
Dickstein executives declined to comment Wednesday.
Hills emerged from Chapter 11 in October 1993.
Dickstein is also seeking stockholder approval for four new directors. The board members Dickstein wants to replace are Susan E. Engel, a consultant and former president and ceo of Champion Products; Richard B. Loynd, president and ceo of Interco Inc., a company that is 60 percent owned by Apollo Advisers L.P., a Hills investor; James L. Moody Jr., chairman of the Hannaford Bros. food store chain, and John G. Reen, Hills' executive vice president and chief financial officer.
The proposed replacements are Mark B. Dickstein, president of Dickstein and chairman of the Carson Pirie Scott department store chain; Mark D. Brodsky, vice president of Dickstein; Mark L. Kaufman, a Dickstein vice president and a Carson director, and Richard I. Wrubel, president of Wrubel Associates, a retail consultant.
Dickstein said it plans to accomplish the buyback by converting Hills stock into shares of a new holding company.
Hills closed up 3/4 to 22 1/4 Wednesday on the New York Stock Exchange.
In its earnings report, Hills said after $9 million in interest expenses, the retailer posted a net loss of $3.6 million in the quarter. Last year, $5.2 million in expenses put the net loss at $4.9 million.
Sales rose 5.1 percent to $375.6 million from $357.3 million and same-store sales advanced 5.5 percent.
Hills operates 152 discount stores in 11 Midwestern and mid-Atlantic states.
--Fairchild News Service

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