Board of Clorox Co. (CLX), Monday adopted a stockholder rights plan, often referred as a 'poison pill,' in response to activist investor Carl Icahn's $12.6 billion takeover bid, indicating that it is "neither credible nor adequate."
The maker of household-cleaning products has adopted a stockholder rights plan and declared a dividend of one right on each outstanding share of its common stock. Such rights plans, or "poison pills," are often undertaken to ward off unwanted takeover attempts.
"The Rights Plan is designed to assure that all of Clorox's stockholders receive fair and equal treatment in the event of any proposed takeover of the company and to guard against tactics to gain control of Clorox without paying all stockholders a premium for that control," the company said in the statement.
Last week, Icahn's Icahn Enterprises L.P. offered to acquire the remaining shares in Clorox that it does not already own for $76.50 per share net in cash. The total merger consideration would be $12.6 billion before fees and expenses. Icahn, the largest shareholder in Clorox, beneficially owns 9.4 percent stake.
In a poison pill strategy, companies issue huge amounts of stock in order to make a threatened takeover more expensive. If any investor tries to buy large amounts of shares, companies give other shareholders rights to buy new shares to dilute the value of existing stakes.
As per Clorox's rights plan, the rights will be exercisable only if a person or group acquires 10 percent or more of Clorox's common stock. Each right will entitle stockholders to purchase, at the then-current exercise price, additional shares of common stock having a value of twice the exercise price of the right.
CLX closed Monday's trading on the NYSE at $73.04, down $1.51 or 2.03%. The stock, however, gained $0.10 or 0.14% in after-hours trade. Trading volume for the day was 5.0 million shares, much above the three-month average volume of 1.4 million.
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