The plan, which some refer to as a “poison pill,” aims to put the brakes on any hypothetical attempts to acquire the company without management’s assent. Such preventive strategies allow existing stockholders to acquire additional shares at a lower prices should an outside entity acquire a large stake. The voice recognition software company said the plan is not in response to any unwelcome bids, though activist investor Carl Icahn has been building up a stake.
Under the plan, holders of Nuance stock at close of business Aug. 29 will be entitled to receive one “right” for each share of stock they own.
In the event of a takeover attempt, defined as a person or group acquiring 20% or more of Nuance’s stock without prior approval from the Board, the rights entitle their holders to buy “one one-thousandth of a share of a new series of participating preferred stock at an exercise price of $87.00 per right,” and upon exercising the right, to further buy up to $174 worth of Nuance common shares. The rights further entitle their holders to purchase an interest in any “acquiring entity” that emerges into or succeeds in taking over Nuance.
The aim of “poison pills” such as these is generally to dilute the stake of any hostile acquirer, making a takeover more difficult, and expensive, to accomplish. Nuance Communications made a point of emphasizing that “the Rights Plan was not adopted in response to any current effort to acquire control of Nuance.”
— Material from The Associated Press was used in this report.
The article Nuance Adopts “Poison Pill” Provisions originally appeared on Fool.com and is written by Rich Smith.
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