What’s Going On With Pier 1 Imports And One Of Its Largest Shareholder?
Pier 1 Imports (NYSE: PIR) announced after Tuesday’s market close that it has adopted a “poison pill” rights plan with a 10 percent ownership limitation.
Simply put, a poison pill is a strategy that a company implements to discourage hostile takeovers or assaults from activist investors. In Pier 1 Imports’ case, once a particular shareholder owns 10 percent of the company then the provision would kick in which allows shareholders to buy additional stock at a discount. This would dilute the share count and make any hostile takeover more difficult.
Pier 1 Imports’ announcement on Tuesday is no accident. Alden Global Capital, an activist investor, bought a 9.5 percent stake in the retailer last week.
Alden Global Capital responded to Pier 1 Imports’ poison pill in an open letter on Wednesday. The fund expressed its disappointment in the company resorting to a “highly questionable form of entrenchment rather than engage constructively.”
Pier 1 Imports’ stock has fallen by more than 16 percent since the start of 2016 and more than 40 percent over the past year.
Alden Global further added that it has never mentioned to Pier 1 Imports “anything even close to an intention or interest in acquiring” the company. As such, it concluded that the poison pill adoption is a “scare tactic” to make the investment firm “appear to be a threat.”
“If anyone poses a threat to long-term value creation at Pier 1, it is the current Board who has overseen disastrous operational performance and substantial value destruction,” Alden Global added in its letter. “It is ironic, indeed, that the current Board has taken steps to limit our ownership when the entire Board, apart from the soon-exiting CEO, collectively own only about 0.6% of the Company and has very little of their own ‘skin in the game.”
Nevertheless, the investment firm attempted to offer an olive branch even when faced with hostility. The letter noted that they remain open in working constructively with the company’s Board of Directors to ensure proper steps are taken to put the company on the right path