Planning Research Corp. last week joined the growing number of companies taking measures to discourage hostile takeover bids by adopting a plan to give shareholders special stock purchase rights in the case of such a takeover.
PRC of McLean said its plan will not prevent takeovers, but is designed to protect its shareholders.
But one analyst said the effect will be to discourage takeover attempts, thereby protecting current management.
PRC, an engineering and professional services firm, said it is "not aware of any takeover attempt and is not discussing or negotiating any such transaction with any party."
The plan, which would make PRC an unattractive target in the case of a hostile takeover, is similar to those adopted since 1983 by 130 publicly traded companies, including 79 in the first three months of this year.
Similar measures have been adopted by local companies, including Flow General Inc., USAir Group Inc. and PHH Group Inc., as well as by corporations such as RCA Corp., Colgate-Palmolive Co. and United Technologies Corp., a company spokesman said.
Under the plan, shareholders will receive special stock-purchase rights that can be exercised only if a person or group acquires 20 percent or more of PRC common stock or announces a tender offer for 30 percent or more of the stock.
The plan gives stockholders the right to buy a certain amount of stock in PRC or the merged entity for half its value. Thus, for each share owned, a shareholder would be able to buy $70 worth of stock for $35.
PRC management could buy back the purchase rights at 5 cents each any time before a 20 percent position had been acquired. The rights expire in 10 years.
The company said it adopted its plan to "reduce the risk that the interests of our shareholders would be rendered secondary to the interests of a small group of investors."
The plan will not prevent a takeover or prevent the board "from open and fair negotiations in the best interests of our shareholders," PRC said. Rather, PRC said the plan is "designed to protect the interests of its shareholders from abusive takeover attempts."
But Eliot Benson, vice president and research director of Ferris & Co. Inc., said the PRC move will "discourage takeover attempts, period.
"The elimination of such attempts acts to entrench management, which eliminates the disciplining effect of a takeover threat," Benson said. "It can make management less efficient. They can become fat, dumb and happy because they are so confident of their position."
Such antitakeover plans "by definition, make the stock less attractive and therefore could affect the price of the stock," Benson said.
PRC stock closed yesterday at $20.38, down $2.12.
Other critics of such measures argue that they deny stockholders the premium price they might gain in a takeover.
Supporters of such measures contend that shareholders lose in a hostile takeover when a raider, perhaps attracted by a low stock price, buys control of a company for less than its fair value or buys a controlling interest and then raids its assets.
PRC reported profits of $6 million on revenue of $372.4 million for its fiscal year that ended June 30.