Fluor Adopts Poison Pill Strategy
US engineering and construction group Fluor has adopted a limited duration stockholder rights agreement, otherwise known as a poison pill.
The move is to protect shareholders from “abusive tactics to gain control of the company,” Fluor said, adding that the rights will not prevent a takeover but should encourage anyone seeking to acquire the company to negotiate with the board first.
“Fluor’s end market diversification strategy, along with its ample liquidity, positions the company to deliver long-term value for its stockholders,” said Alan Boeckmann, Fluor’s executive chairman. “This limited duration rights agreement will protect stockholders from efforts to capitalize on recent market volatility as a result of the Covid-19 pandemic.”
Fluor’s shares had plummeted to $6.23/share on the New York Stock Exchange on Mar. 25, the date of its announcement, compared with a 12-month high of $41.56/share.
The company declared a dividend distribution of one preferred share purchase right on each outstanding share of its common stock to be made on Apr. 10. The rights will expire on Dec. 31, unless they are previously redeemed or exchanged.
The rights will only be exercisable if a person or group acquires 10% or more of Fluor’s outstanding common stock. Each right will entitle stockholders to buy one one-thousandth of a share of a new series of junior participating preferred stock at an exercise price of $50.
US energy firms Occidental Petroleum and Williams also took the same step earlier this month having seen the value of their stock plunge.
“We are witnessing a unique dislocation in equity market valuations,” said Williams’ chairman of the board Steve Bergstrom, who added that the closing price of the group’s common stock on Mar. 19 was 50% below the price just one month before.