The shares of companies that are the target of unsolicited bids often trade above the offer price, as shareholders look for a raised bid or white knight. Investors have some doubts about whether IP can push the deal across the finish line. “It’s a huge distraction for somebody to pursue this strategy,” said Oliver Brahmst, head of law firm White & Case’s mergers and acquisitions group in the Americas. Other hostile deals, such as fertilizer company CF Industries' CF.N run at Terra Industries, have taken more than a year to seal. Temple-Inland has hired some of the same advisers that mounted Airgas' successful defense against Air Products earlier this year: investment bank Goldman Sachs GS.N and law firm Wachtell, Lipton, Rosen & Katz.Īir Products walked away from its bid to take over Airgas in February, after a Delaware judge upheld Airgas' use of a "poison pill" defense. They suggested that board member Arthur Temple III could be a vocal opponent to IP’s bid. Investment bankers who are not working on the deal said the Temple family has historically fought to keep the Austin, Texas-based company from falling into competitors’ hands. Even then, because of Temple-Inland’s staggered board structure, only a minority of its directors would be up for re-election. To do that, he would have to wait until Temple-Inland’s shareholder meeting, which could be as long as a year from now. IP’s long-time CEO, John Faraci, would need to replace Temple-Inland’s board to get the pill removed.
On Tuesday, Temple-Inland moved quickly to shore up its defenses and adopted a “poison pill” shareholder rights plan to dilute the holdings of a potential acquirer. Temple-Inland is fiercely independent and has weathered two challenges from Carl Icahn, selling its timberland business and spinning off its financial services and real estate businesses in 2007 to keep the billionaire investor at bay. “The only leverage that IP really has is price. “I think it’s going to be a long, drawn-out battle,” said King She, an analyst at Susquehanna International Group specializing in takeovers. IP needs to react decisively by sweetening its bid to bring Temple-Inland to the table, experts said, pointing to lengthy takeover battles in the raw materials industry that have not ended well for acquirers, such as Air Products' APD.N failed pursuit of rival industrial gas maker Airgas ARG.N. The company also raised antitrust concerns: the combined unit would control around 40 percent of the North American container board market. Temple-Inland rejected the $30.60-per-share cash bid on Monday, saying it was “grossly” undervalued despite a 46 percent premium. International Paper Co IP.N should not fall into the "slow poker" trap as it looks to launch a $3.3 billion hostile takeover bid for smaller rival Temple-Inland Inc TIN.N, bankers and analysts say. But the strategy can also backfire by giving other players the time to draw superior cards and win the game. NEW YORK, June 7 (Reuters) - In poker, slow playing a strong hand with small early bets can eventually lead to a big payoff.
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