Francesca’s adopts ‘poison pill’ after firm grabs nearly 22% stake

August 07, 2019

Alon Kapen was quoted in a Retail Dive article that discusses Francesca’s and its latest plan to avoid a hostile takeover.

Below is an excerpt from the article.

Francesca’s last week announced that its board has unanimously adopted a shareholders rights plan that is commonly known as a “poison pill” because it’s useful against a hostile takeover from investors accumulating a major ownership stake on the open market.

Plans like the one instituted by Francesca’s board, which didn’t require shareholder approval, allow investors, (other than an investor or group grabbing a stake of 15% or more following this move), to buy preferred shares at a discount, which dilutes the putative acquirer’s stake and makes a takeover more difficult.

They are rarely actually triggered, however, and are often instituted as a bargaining chip, according to Alon Kapen, partner at law firm Farrell Fritz.

“The Board adopted the Rights Plan to deter any entity, person or group from gaining control of the Company through the open market or private transactions without paying an appropriate control premium or offering fair and adequate value to all stockholders,” the company said in its release. “It is intended to enable the stockholders of the Company to realize the value of their investment in the Company, ensure that all stockholders receive fair treatment, and provide the Board and stockholders with adequate time to make informed decisions. The Rights Plan is not intended to deter offers that are fair and otherwise in the best interests of the Company’s stockholders.”

To read the full article, please click here.

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