New York: Indian conglomerate Essar Group has won a boost to its proposed acquisition of Esmark Inc. with the US company adopting a “poison pill” to shield itself against any hostile takeover.
Essar is competing with Russia’s OAO Severstal to take over Esmark, whose board has endorsed the Indian group’s offer of more than $1 billion (Rs4,280 crore). Essar raised its offer to $19 a share after its previous bid of $17 was matched by Severstal.
Essar Group chairman Shashi Ruia
Esmark said it adopted a shareholder rights agreement designed to help its stockholders receive the highest value from a sale of the company. Such shareholder-rights efforts, widely known as poison pills, are intended to ward off hostile takeovers.
“We believe the adoption of the stockholders’ rights agreement will level the playing field among bidders and help maximise shareholder value as we move forward with the current process to sell the company,” Esmark chairman and chief executive James Bouchard said.
The stockholders rights become exercisable if anybody becomes an “acquiring person” by buying 15% or more of the Esmark common stock.
The agreement will not apply to existing stockholders who own 15% or more of Esmark’s existing common stock, unless they acquire additional shares in an amount equal to or greater than 25% of the company’s outstanding common stock.
In addition, the stockholders’ rights agreement would not apply to a tender offer or other acquisition proposal made by United Steelworkers, Esmark’s labour union, which has thrown its backing behind Severstal.
It also does not apply to a tender offer for which the company has made a favourable recommendation.
Esmark announced that its board has declared a dividend of one preferred share purchase right for each outstanding share of Esmark common stock, payable on 13 June to the stockholders of record at the close of business on 13 June.
“Each right will allow its holder to purchase from the company one one-hundredth of a share of Series A Junior Participating Preferred Stock” for $60 once the rights become exercisable, it said.