Pier 1 Imports (PIR): Detail On The New Shareholders Rights Plan - Wedbush
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Wedbush analyst, Seth Bashm, reiterated his Outperform rating on shares of Pier 1 Imports (NYSE: PIR) following the company’s Board announcing last night the implementation of a short-term Shareholder Rights Protection Agreement (i.e., “poison pill”). PIR wants to “guard against coercive or unfair tactics to gain control of the company without paying all shareholders an appropriate premium”. This comes in response to last week’s disclosure by activist shareholder Alden Capital of a 9.5% stake in PIR,
The agreement and its details have not been filed yet with the SEC, but the analyst believes it will prove to be pretty standard. The agreement is designed to dilute any shareholder acquiring a greater than 10% stake in PIR (except for those already having a 10% stake, namely T. Rowe Price with 11%) after today.
The company declared a dividend of one right (a “Right”) on each outstanding share of the Company's common stock, payable to holders of record as of the close of business on October 7, 2016. Each Right entitles the holder (excluding the “acquiring person”) to purchase a fraction of a share of Pier 1 participating junior preferred stock having economic and voting terms similar to one share of the Company's common stock at an exercise price of $17.50 per Right; the market value of the junior preferred stock on the date of a transaction will be some multiple (often 2x) of the Right’s exercise price, but this detail has not been disclosed yet. Under the Rights Agreement, the Rights become exercisable if any person or group acquires 10% or more of the Company’s common stock (in which case, such person(s) would become an "acquiring person(s)" in accordance with the terms of the Rights Agreement). The $17.50 exercise price is a substantial 4.2x multiple of yesterday’s closing price of $4.18 and theoretically may represent the Board’s view of the long-term trading value of the company’s common stock.
The plan is in effect through the company’s 2017 Annual Meeting unless amended; PIR’s annual meetings typically are in June.
Shares of Pier 1 Imports closed at $4.18 yesterday.
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