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In Alltel Corporation’s battle to buy CenturyTel Inc., the decisive shots may have been fired 16 years ago by New Orleans’ Jones, Walker, Waechter, Poitevent, Carr�re & Den�gre. In November 1986 CenturyTel (then known as Century Telephone Enterprises Inc.) adopted a shareholder rights plan, drafted by Jones Walker, to protect itself against hostile takeover bids. CenturyTel was the first Louisiana corporation to put such a measure in place, according to Jones Walker partner Kenneth Najder, who began managing the firm’s relationship with CenturyTel in 1992. CenturyTel wasn’t reacting to a specific threat, Najder says, but its management was worried that the major capital expenditures it was planning would depress the company’s stock and leave it vulnerable to a hostile takeover. Instead of turning to one of the Wall Street firms that pioneered takeover defenses, CenturyTel called on Jones Walker, which had been recommended a few years earlier by a tax attorney in CenturyTel’s hometown of Monroe, La. Jones Walker lawyers crafted several anti-takeover devices in 1985 and 1986; these now form the backbone of CenturyTel’s effort to resist Alltel’s advances. As part of its work, Jones Walker adapted a poison pill defense — a new concept at the time — to Louisiana law. That provision gives CenturyTel shareholders an opportunity to buy discounted stock of a surviving company in a hostile takeover. Jones Walker also included several other “shark repellent” provisions. One calls for a standard staggered board, which ensures that only a few members are up for election at once, making it difficult for outsiders to gain control through proxy fights in a single year. Another requires “cause” and a majority vote of the company’s shareholders to oust board members. “It was an exciting time then because anti-takeover measures were on the cutting edge,” recalls Najder, who, as a second-year associate, watched the firm’s more senior lawyers prepare the CenturyTel plan. The lawyers who did the bulk of the work on the plan have left the firm, and one is now a CenturyTel board member, Najder says. Since coming to Jones Walker in the ’80s, CenturyTel has grown into one of Louisiana’s largest companies, as measured by market capitalization. Its relationship with Jones Walker has grown as well, with CenturyTel sending a steady stream of M&A, securities, and other corporate work to the firm, Najder says. Over the years Jones Walker has strengthened CenturyTel’s takeover defense strategy as well. In 1987, the firm devised CenturyTel’s “time-phased” voting structure, which granted 10 votes to CenturyTel shareholders for each share they had held continuously since March 30, 1987. The system also granted 10 votes per share to those who held shares continuously for 48 months after that date. The idea was to reward investors who were interested in CenturyTel’s long-term prospects, not just its quarterly growth. But in 1991, after it became clear that outside institutional investors could use the device to gain control of the company, CenturyTel’s shareholders voted to freeze the provision that gave 10 votes per share to shareholders who held shares for 48 continuous months, while retaining the section that granted the additional votes to holders of shares since 1987. When the amendment was proposed, angry shareholders filed suit to block it, but after a three-day trial, the case was dismissed. The revised voting structure has given CenturyTel’s employees and management a disproportionate amount of voting power in relation to their holdings. Such modifications have been rare. Overall, the defenses established in the ’80s “have stood the test of time,” with only minor updates, Najder says. But with Alltel’s battle for CenturyTel becoming increasingly litigious, the true test of CenturyTel’s vintage anti-takeover defenses — and Jones Walker’s 16-year-old legal work — may be in the courts.

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