After becoming aware of an accumulation of a significant amount of the common stock of the company, Safeway’s board of directors adopted a one-year stockholder’s rights plan.
Referred to as a “poison pill,” the measure is designed to thwart takeover attempts by diluting the holdings of an investor if its stake exceeds a set threshold.
Safeway said its board believes the plan will help “promote the fair and equal treatment of all stockholders of the company and ensure that the board remains in the best position to discharge its fiduciary duties to the company and its stockholders.”
Safeway has recently undertaken a number of strategic initiatives including the IPO of Blackhawk Network and the pending sale of its Canadian assets. The rights plan, which the board adopted following evaluation and consultation with the company’s outside advisors, is similar to plans adopted by numerous publicly traded companies.
Under the plan, one preferred stock purchase right will be distributed for each share of common stock held by stockholders of record on Sept. 30. Under certain circumstances, each right will entitle stockholders to buy one one-thousandth of a share of newly-created Series A Junior Participating Preferred Stock of the company at an exercise price of $100. The board of directors will be entitled to redeem the rights at $0.01 per right at any time before a person or group has acquired 10 percent or more (15 percent or more in the case of a passive institutional investor) of the outstanding common stock. The rights will expire on Sept. 15, 2014, subject to the company’s right to extend such date, unless earlier redeemed or exchanged by the company or terminated.
Subject to limited exceptions, if a person or group acquires 10 percent or more of the outstanding common stock (15 percent or more in the case of a passive institutional investor) of the company (including in the form of synthetic ownership through derivative positions), each right (other than those held by that person or group) will become exercisable and entitle its holder to purchase, at the right’s then-current exercise price, a number of shares of common stock having a market value at that time of twice the right’s exercise price. If the company is acquired in a merger or other business combination transaction that has not been approved by the board of directors after the rights become exercisable, each right will entitle its holder to purchase, at the right’s then-current exercise price, a number of shares of the acquiring company’s common stock having a market value at that time of twice the right’s exercise price.
The rights will automatically attach to the shares of common stock, trade together with those shares and will be represented by certificates representing the common stock. The rights distribution is not taxable to stockholders. Stockholders are not required to take any action to receive the rights distribution.
Until the rights become exercisable, outstanding stock certificates (or, in the case of shares reflected on the direct registration system, by the notations in the book-entry account system of the transfer agent for the shares) will represent both shares of the company’s common stock and the rights. The issuance of the rights will have no dilutive effect and will not impact reported earnings per share for the company.
Further details about the rights plan will be contained in a Form 8-K to be filed by the company with the U.S. Securities and Exchange Commission.
Pleasanton, Calif.-based Safeway operates 1,412 stores in the U.S. and 223 stores in western Canada and had annual sales of $44.2 billion in 2012. On June 12, Safeway announced the planned sale of substantially all of the net assets of its Canadian division.