Williams’ poison pill upsets proxy advisor

While Williams Chairman Stephen Bergstrom faces no opposition in the company’s upcoming annual shareholder meeting, a proxy advisor says he should not be re-elected. The claim is based on the company’s recent move to adopt a so-called poison pill aimed at making the company seem unattractive for any takeover attempt.

The claim comes from Institutional Shareholder Services after the pipeline operator adopted a poison pill to fend off unwanted suitors. ISS says shareholders should at least withhold their votes for Bergstrom.

Williams was one of several companies which adopted poison pills last month as their shares plunged amid the coronavirus rout, but ISS objects to the “highly restrictive” nature of the pill, which kicks in if an unwanted shareholder buys a stake of just 5%.

Williams filed its Rights Agreement on March 20 with the Securities and Exchange Commission.

“The Board determined that the adoption of the Rights Agreement is appropriate in light of the extreme market dislocation that has resulted in the company’s stock being fundamentally undervalued,” stated the filing.

“The conditions stemming from the impact of COVID-19 on the economy and the volatility of the oil market have resulted in significant declines in the company’s stock price. The Rights Agreement is intended to enable all Williams stockholders to realize the full value of their equity investment and to reduce the likelihood of those seeking short-term gains taking advantage of current market conditions at the expense of the long-term interests of stockholders or of any person or group gaining control of Williams through open market accumulation or other tactics (especially in volatile markets) without paying an appropriate control premium.”

The Rights Agreement will last only until March 20 of 2021 and explained that stockholders “without a plan or an intent to change or influence the control of the company” are exempt.

The issue that ISS takes issue with is the 5% trigger threshold for exercising the right.

“The rights become exercisable only if a person or group acquires beneficial ownership (as defined in the Rights Agreement) of 5% or more of Williams common stock unless exempted under the Rights Agreement (including in the case of a transaction approved by the Board),” according to the SEC filing.

Williams stated in the filing that it reached out to all major stockholders who “understand the need for the adoption of our Rights Agreement in the context of the highly unusual and extreme circumstances that led to the current severe market conditions and the need to protect the interests of the company and its long-term stockholders. Some of our stockholders have even expressed outright support for the Rights Agreement, while others who generally have reservations about rights plans have acknowledged that these circumstances and/or the limited duration of our rights plan mitigate their concerns about it.”

According to ISS, of the 14 companies that adopted poison pills during March 13-30, all of the others chose triggers in the 10%-20%, and the proxy advisor calls the threshold for the Williams pill “extremely rare.”

Bergstrom is running unopposed on the director slate, so there is little to no chance of his removal, and nearly 99% of investors voted for him last year.