2nd UPDATE: Abercrombie Delays Vote On Reincorporation Plan

Abercrombie & Fitch Co. (ANF), facing resistance to its plan to reincorporate in its home state of Ohio, delayed a special meeting of shareholders it had scheduled for Monday, in order to drum up enough investor support for the move.

The teen retailer said in a proxy filing on Monday that it was "convinced" it had strong support for the move after "a succession of positive communications with a number of significant stockholders." But, general counsel Ronald Robins said, it has "been unable to obtain a strong consensus in favor of reincorporation at this point."

Robins in an interview with Dow Jones Newswires said there is no timetable to reconvene the meeting, and the company will either call a new special meeting, add the vote to the slate of proposals at its annual meeting or scrap the reincorporation vote if it can't get the support it desires. He said there is a possibility that Abercrombie could get the proposal to pass today, but it would be just barely, and Abercrombie's goal isn't to "squeak by," but to get a consensus approval.

If it reincorporates in Ohio, Robins said the company will drop, with no intention to ever reinstate, its longstanding "poison pill" antitakeover defense, a protective vestige of the bylaws it had when first was spun off from its former parent in the late 1990s. In any event, it will still ask holders to approve the de-staggering of its board, considered another shareholder-friendly measure.

A vast majority of major, public U.S. companies incorporate in Delaware, a state known for its expert corporate-law judges, who strike a balance between protecting shareholder rights and allowing a company's independent board of directors to make difficult decisions unfettered.

Abercrombie has cited several reasons for the move to its home state, namely saving money on Delaware filings, a commitment to Ohio, saving as much as $180,000 in annual tax liabilities and the ability to attract directors and alter its corporate governance in a way it says "protects and benefits the company and its stakeholders."

The company has faced criticism for its plan including from former lawyer and current law professor Steven Davidoff, who writes for the New York Times's Dealbook Web site under the moniker Deal Professor. He cites provisions in Ohio law that could either make it easier for management to buy the company or make it harder for suitors to acquire the company, both to the potential detriment of stockholders.

Proxy advisory firm ISS had similar criticisms of the move's effect on shareholder rights.

Abercrombie addressed at least part of Davidoff's criticism in a Securities and Exchange Commission filing last week, declining to comment on "rumors or speculation" about a management buyout, but noting that its proposal followed "well over a year and a half" of review. It added that another proxy advisory firm, Glass Lewis & Co. said recently that the move brings "positive changes to shareholders," and opined that "the positive aspects of the reincorporation greatly outweigh the negative provisions."

Robins said that, whether as a result of press criticism or other reasons, some holders that had once supported the reincorporation now oppose it, including one hedge fund he declined to name. Abercrombie is prepared to make changes to its proposal, he said, which could change how the company will deal with certain Ohio law provisions that make the balking shareholders uneasy, and it intends to have further discussions with them.

For example, he said Abercrombie would waive certain Ohio regulations which prohibit voting by merger arbitrageurs and others who accumulate large stakes after prospective takeover bids are announced.

"I don't think this is a shareholder friendly move," Brian Sozzi, an analyst with Wall Street Strategies, said of the current plan. Nonetheless, even though the tax and other cost savings associated with the move appear small, they are consistent with Abercrombie's cost-cutting regimen, which Sozzi said is aimed at helping it achieve its "ambitious" target for operating profits next year.

Abercrombie and peer American Eagle Outfitters Inc. (AEO) are among the names often speculated as potential targets, particularly following a $3 billion takeout bid for rival J. Crew Group Inc. (JCG) in November from a team that includes its chief executive.

Robins said the negative press received by the J. Crew deal could be another reason that holders once for the reincorporation have since changed their minds.

Shares of Abercrombie were up 32 cents at $57.13 in recent Monday trading and are up almost 57% over the past year.

 
   -By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; 
   [e-mail] 
   --Lauren Pollock contributed to this article.