Polaroid stalls while it weighs takeover defenses

Polaroid has taken another step to stall attempts at a hostile takeover. On Wednesday, the instant-photography company filed a lawsuit attempting to block Shamrock Holdings Inc. from taking it over.

Financial analysts tend to view the Polaroid lawsuit as a stalling tactic.

``It tends to bring to the surface information on who's on their side and who's doing work against them,'' says William Relyea, an analyst with Eberstadt Fleming Inc. a brokerage in New York.

``It will be interesting to see how Shamrock retaliates,'' adds Brenda Lee Landry, an analyst with Morgan Stanley & Co. in New York.

Polaroid's action came on the heels of its rejection of a second takeover offer from Shamrock, which is owned by Roy Disney.

The photo company said Tuesday that it was weighing the possibility of selling a minority stake to a third partner. Such a partial takeover by a ``white squire,'' as opposed to a full buyout by a ``white knight,'' would presumably further slow Shamrock's takeover efforts, since a hostile offer requires approval from 85 percent of Polaroid's stockholders.

But Ms. Landry questions the move, because it would dilute the earnings value of the stock Polaroid already has. ``If you were Polaroid, I would think, you want to get your stock price up as high as you could, so it would look too expensive to take it over.''

Still, Shamrock is the only company to date that has publicly made a bid on Polaroid, which raises an interesting issue, says Mr. Relyea.

``How many candidates are there for buying this one out?'' he asks. ``The fact is, we haven't seen another bidder.''

One of the charges in the Polaroid lawsuit on Wednesday is that Shamrock was attempting to put the Polaroid stock in play so that the Disney company could make a short-term profit. Relyea says there has been ``widespread speculation'' that that is the case, though he adds that such action may not itself be illegal.

Meanwhile, Polaroid still has its defenses in place. In July, when Polaroid got wind of a hostile bid from Mr. Disney, the photo manufacturer announced it was branching out into conventional film and put several antitakeover provisions in place, among them the creation of an employee stock ownership program.

Although the ESOP is being challenged by Shamrock in a case set to go to trial Oct. 19, Relyea says that ``it isn't clear that the defenses won't work.''

Among the thicket of lawsuits in which Polaroid is involved, one still stands out: the appeal by Kodak of a 1985 court ruling that Kodak had infringed on Polaroid's patents by introducing its own (now defunct) instant-film operation.

Polaroid is seeking $5.7 billion in damages. Analysts generally expect that Polaroid will be awarded perhaps as much as $2 billion, according to Robert Maney, an analyst with Prudential-Bache Securities Inc. in Rochester, N.Y.

``That's the big carrot in front of the share owners, the carrot in front of Shamrock,'' says Landry.