Is Pier 1 Taking The Poison Pill?

Pier 1 is trying to protect itself from potential takeover bids. So, in order to do that, the company is invoking something known as a “poison pill” provision, also known as a “Rights Protection Agreement,” which protects the company from any single shareholder acquiring more than a 10 percent stake in Pier 1, according to MarketWatch.

This comes after Global Capital LLC, a hedge fund, revealed last week that it had acquired a 9.5 percent stake in the home-goods retailer.

The Rights Protection Agreement “may cause substantial dilution to anyone acquiring 10 percent or more of the company’s common stock, which may block or render more difficult a merger, tender offer or other business combination,” according to a statement from Pier 1.

Although the new provision won’t outright prevent a takeover, it does attach to every common stock the right to buy a fraction of junior preferred stock at the price of $17.50, carrying the same voting rights as the common stock, thus watering down the influence of shareholders that hold a large percent of Pier 1’s stock.

“The board feels it is important to ensure that all shareholders have the opportunity to realize the long-term value of the iconic Pier 1 Imports brand and to guard against coercive or unfair tactics to gain control of the company without paying all shareholders an appropriate premium,” Terry London, Pier 1’s chairman, said in a statement.