As company stock prices across industries plummet due to the COVID-19 pandemic, a number of boards and management teams have moved to implement shareholder rights agreements to deter hostile takeovers.
Retail holding company Tailored Brands Inc., mattress and bedding manufacturer Tempur Sealy International Inc., and engineering and construction firm Fluor Corp. each recently announced they had adopted poison pills.
Houston-based Tailored Brands, which owns men’s clothiers Men’s Wearhouse and JoS. A. Bank, said in a Form 8-K filed March 31 with the Securities and Exchange Commission that its board had adopted a short-term shareholder rights plan to protect investors.
The company said the COVID-19 pandemic had affected market activity and increased the volatility in the trading of Tailored Brands’ stock.
In a March 27 statement attached to a Form 8-K, Tempur’s board announced a dividend distribution of one right for each outstanding share of the company’s common stock. The company specified that each right entitles the holder to purchase from Tempur one-thousandth of a share of the series A junior participating preferred stock at an exercise price of $273.
Tempur said it adopted the rights agreement to ensure all shareholders receive fair and equal treatment and to protect the Lexington, Kentucky-based company from losing control to any one entity or stockholder. The rights agreement will dilute the ownership interest of any person or group that acquires 10% or more of Tempur’s common shares without first getting approval from the board, according to the Form 8-K.
Irving, Texas-based Fluor said in a Form 8-K filed March 25 that it adopted a limited-duration poison pill and also declared a dividend distribution of one preferred share purchase right for each outstanding share of its common stock.
The company said the agreement is designed to “protect against abusive tactics to gain control of Fluor without paying all shareholders a premium for that control.”
Each right will give Fluor’s stockholders the ability to buy one-thousandth of a share of a new series of junior participating preferred stock at an exercise price of $50, the Form 8-K said.