Plano, Texas-based J.C. Penney (NYSE:JCP) announced what it's calling a "short-term stockholder rights" plan Thursday.
The plan, which is of the sort commonly referred to as a "poison pill," aims to put the brakes on any hypothetical attempts to acquire the company without management's assent. Under the plan, holders of Penney stock at close of business on Sept. 3 will be issued, in the form of a dividend, one "right" for each share of stock they own.
If a person or group attempts to buy 10% or more of Penney's stock, the rights will become "exercisable." (Penney shareholders Pershing Square Capital Management and Vornado Realty Trust are specifically exempted from this provision.) At such time as rights become exercisable, their holders will become entitled to buy up to $110 shares of Penney stock for each right they own, at a cost of $55.
The aim of "poison pills" such as these is generally to dilute the state of any punitive acquirer, making a takeover more difficult, and expensive, to accomplish.
Penney made a point of emphasizing that the plan "was not adopted in response to any effort to acquire control of the Company." Management may be feeling vulnerable to a takeover attempt, however, given the size of the losses it's been incurring lately and, most recently, in Tuesday's earnings report.
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