it more expensive for someone to obtain a controlling interest, reports Ahmed ElAmin The Bank of N.T. Butterfield and Son Ltd. is set to swallow the same poison pill defence the Bank of Bermuda Ltd. adopted earlier this year against any takeover attempt by unwanted suitors.

At its annual general meeting on October 29 the bank's board of directors are proposing major changes to the company's incorporating act and bye-laws, including one aimed at making it more unappealing for someone to buy a controlling amount of shares.

Another amendment would give the bank the power to buy its shares on the stock market. A share option plan for board directors and for senior management is also being proposed.

The poison pill amendment would require a two-thirds "supermajority'' vote to remove a director, or to sell or transfer the bank's assets. The measure is intended to make it more expensive for someone to acquire a controlling interest, especially if the shares are selling at a discount compared to the book value of the company.

Currently the bank's share price, at $14.50 yesterday, is at par with its book value. According to an investment analyst it's common in the US for banks' shares to sell at 1.5 to 2.5 price to book ratio. By those standards the Bank of Butterfield is selling cheaply.

Since the start of the year the bank's share price has had a 56 percent gain.

Peter Rodger, the bank's legal advisor, said the amendment was a reaction to the recent acquisitions by overseas institutions and investors in the shares.

The board is also concerned about any possible future change to Bermuda's rule restricting foreign ownership in local companies to 40 percent.

Mr. Rodger said the World Trade Organisation was meeting in December to revive talks about trade and services issues which would seek to get rid of such protectionist measures worldwide.

"Sixty-forty may not last for ever,'' he said.

Soon after the Bank of Bermuda announced its amendment making it more difficult for a shareholder to gain control, the board also announced it was considering seeking a secondary listing for its shares on another stock exchange overseas.

Mr. Rodger said the Bank of Butterfield board was not considering a secondary listing at the moment. Both banks are listed on the Bermuda Stock Exchange.

He said another amendment giving the bank the authority to repurchase its own shares was intended to be used as a means of increasing earnings per share.

There is as yet no plan to go into the market but that could change depending on the bank's stock price.

Another amendment would give the board the power to issue share options to its members and the bank's senior management.

The shareholder document states: "The wisdom of providing attractive incentive programmes for key personnel and board members is now universally acknowledged. It is the intention of the board to develop a share option plan to assist the bank in attracting, retaining and building its intellectual capital.'' The board is also proposing staggered three-year terms for its 16 members.

Currently directors are elected for a year's term, and then may be re-elected at the next annual general meeting.

After the amendment is made, one-third of the board's terms would expire at the end of each year.

At the annual general meeting on October 29 president and chief executive officer John Tugwell's seat will become vacant due to his announced resignation from the bank. The seat held by board chairman Sir David Gibbons will also become vacant. Under the bank's rules he must retire at age 70.

The names of the two new directors to fill the vacant spots have not been announced. One seat will be filled by Mr. Tugwell's successor who has not been chosen yet, Mr. Rodger said.

No one has been proposed as a director for the other seat as of yet or for the position of chairman. The term of Robert Stewart, chief executive officer of the Shell Group of companies in Bermuda, is slated to expire at the bank's 1998 annual general meeting. The term of James King, the board's vice chairman and chairman of the Bermuda Telephone Co. Ltd. and of Argus Insurance Co.

Ltd., is slated to expire at the 2000 annual general meeting. Both have been rumoured to be the most likely candidates for the chairmanship of the bank.

Mr. Rodger said he "picked names out of a hat'' to determine which current directors' terms would expire when for the proposed makeup of the next board.

Peter Rodger