Hertz Global Holdings, Inc. (NYSE:HTZ) adopted a one-year shareholder rights plan following unusual and substantial activity in its shares.
The rental car company’s move is to prevent investors from gaining control of the firm.
A shareholder-rights plan, also known as a poison pill, is designed to dilute the value of the stock by flooding the market with additional shares, making it expensive for an investor to acquire a controlling stake.
The rental car company’s shareholder-rights plan has a 10% trigger, and is being used to reduce the likelihood that any individual or group would gain control of the company through the open market before engaging in talks with the company’s board.
Flurry of poison pill adoption
In the recent past, corporates have increasingly started adopting poison pill plans.
For instance, Riverbed Technology, Inc. (NADAQ:RVBD) instituted a poison pill by way of a rights issue that would make it highly expensive to acquire the company through a hostile takeover move.
MGM Holdings Inc (OTCMKTS:MGMB)’s management adopted a poison pill and announced a $75 million buyback.
Aeropostale Inc adopted a poison pill last month that would be triggered if a stockholder buys 10% of the clothing retailer. The move was considered an attempt to ward off unwanted takeover attempts, following the teen clothing retailer facing fire from activist shareholders.
Unusual and substantial activity
Hertz Global Holdings, Inc. (NYSE:HTZ)’s move is attributed to unusual and substantial activity in the company’s shares. Alexandra Stevenson of Dealbook points out that the rental car company’s move comes as activist investors are becoming more successful in campaigns to pluck directors from company boards and replace them with their own candidates. Activist investors often buy shares in a company with the intention of shaking things up.
The leading car rental company said the plan would allow management to continue ‘strategic initiatives’, including the integration of its recent $2.6 billion acquisition of Dollar Thrifty, which the company acquired last year after a protracted battle with its rival Avis.
Bank of America, Merrill Lynch and Barclays are acting as financial advisors while Cravath, Swaine & Moore are acting as legal counsel to Hertz Global Holdings, Inc. (NYSE:HTZ).