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Lilly shareholders fail to remove anti-takeover measures

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A proposal that would have weakened Eli Lilly and Co.’s defenses against an unwanted takeover failed to pass Monday despite a large majority of shareholders voting to remove those barriers for the second straight year.

At the drugmaker’s annual shareholders meeting at its Indianapolis headquarters, 84.7 percent of the votes cast called for removing several provisions designed to prevent a hostile takeover of the company.

However, Lilly’s bylaws require approval from 80 percent of all shares—whether voted or not—before removing the provisions. By that standard, only 72.6 percent of shares were voted in favor of removal.

The vote tallies were nearly identical to those at last year’s meeting.

For the past 25 years, Lilly has required the approval of 80 percent of the shareholders not only to approve hostile takeovers, but also to enact measures used to achieve them, such as removing directors before their terms end or expanding the size of the board.

If the proposal had passed, such measures could have been approved by a bare majority of shareholders.

“Many shareholders believe that supermajority voting provisions impede accountability to shareholders and contribute to board and management entrenchment,” Lilly said in its proxy statement.

Investors typically favor low barriers to hostile takeovers because an acquiring company almost always pays a premium price to entice shareholders to approve such mergers.

Lilly’s board of directors, which has been fiercely independent during multiple waves of consolidation in the pharmaceutical industry, opposed the removal of the takeover barriers for three years. But it has now supported removal each of the past two years.

Board support has clearly made a difference. The proposed removal had received no higher than 57 percent support in previous years.

“While it is important to maintain appropriate defenses against inadequate takeover bids, it is also important for the board to maintain shareholder confidence by demonstrating that it is responsive and accountable to shareholders and committed to strong corporate governance,” Lilly said in the proxy.

Shareholders also failed to amass enough votes to approve annual election of Lilly directors, something the board has advocated for years. That proposal received 85 percent of shares voted, but only 73 percent of all shares. It needed 80 percent of all shares to pass.

However, with 88 percent in favor, stockholders did approve a proposal that will let them annually to express approval or disapproval of Lilly's executive compensation. The Dodd-Frank Act, approved by Congress last year, requires public companies to give their shareholders a so-called "say on pay" at least every two or three years.

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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