In an earlier post, we wondered aloud to New York readers whether Netlfix would adopt a shareholder rights plan, commonly called a "poison pill", to ward off Carl C. Icahn, the billionaire "activist investor" who has acquired just under 10 percent of the company's stock and seems to be eying a corporate takeover.
On Monday, that's exactly what the company did.
The "poison pill" plan would make it more expensive for Icahn to acquire further shares of Netflix. Essentially, it issues one "right" for each common share. Each "right" enables the shareholder to buy 1/1,000th of a new share of stock at the price of $350 per right if any one investor acquires 10 percent or more of the company's stock. Icahn currently owns 9.98 percent.
In plain English: The plan would activate if Icahn buys more Netflix stock and would water down his ownership by giving other shareholders an economic incentive to buy more stock.
The rights will expire Nov. 2, 2015.
Now, the ball is in Icahn's court. He released a statement saying the adoption of the poison pill plan is a disappointment to him, but it remains to be seen what his next move will be.
As attorneys who work extensively in the mergers and acquisitions field, we are watching this saga unfold with great interest. Not only is it dramatic, of course, but diligent and responsible attorneys do their best to stay up-to-date with major revelations and changes in relevant areas of law.
Source: The New York Times Dealbook, "Netflix Adopts Poison Pill," Nov. 5, 2012