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Petroleum

Sonat Inc. Adopts New Shareholder Rights Plan to Protect Against Abusive Takeovers

Strategic Insights

— 2 min read

Sonat Inc.'s Board of Directors has adopted a new Shareholder Rights Plan to replace the existing plan that will expire on February 3, 1996. The new plan is designed to ensure that all stockholders receive fair and equal treatment in the event of a proposed takeover and to guard against abusive or coercive takeover tactics. The plan provides for the distribution of one preference share purchase right for each share of Sonat common stock, with the Rights exercisable if a person or group acquires 15 percent or more of Sonat's common stock.

Key Takeaways:

  • The new Shareholder Rights Plan will distribute one preference share purchase right for each share of Sonat common stock on February 3, 1996.
  • The Rights will be exercisable if a person or group acquires 15 percent or more of Sonat's common stock, allowing stockholders to buy one one-hundredth of a share of a new series of participating preference stock at an exercise price of $120.00.
  • Sonat may redeem the Rights for one cent per Right before a person or group acquires 15 percent or more of Sonat's common stock.
  • Each Right would entitle its holder to purchase, at the Right's then-current exercise price, a number of the acquiring company's common shares having a market value of twice the Right's exercise price if Sonat is acquired in a merger or other business combination transaction.
  • The Board of Directors may exchange the Rights (other than those owned by the acquiring entity) in whole or in part at an exchange ratio of one share of common stock (or one one-hundredth of a share of the new series of participating preference stock) per Right.
  • Sonat's Chairman, President, and CEO Ronald L. Kuehn stated that the Rights are intended to help all Sonat stockholders realize the long-term value of their investment.
  • The company is an integrated oil and natural gas company engaged in exploration and production of oil and natural gas, interstate transmission of natural gas, and natural gas and electric power marketing.

Statistics:

  • The Rights will expire on February 3, 2006, unless redeemed earlier.
  • The exercise price of the Rights is $120.00.
  • The Rights will be exercisable if a person or group acquires 15 percent or more of Sonat's common stock, resulting in the distribution of one preference share purchase right for each share of Sonat common stock.
  • Sonat may redeem the Rights for one cent per Right before a person or group acquires 15 percent or more of Sonat's common stock.

Sources:

  • Sonat Inc., "Sonat Inc. Announces Adoption of New Shareholder Rights Plan" (December 1, 1995)
  • PRNewswire, "Sonat Inc. Announces Adoption of New Shareholder Rights Plan" (December 1, 1995)
  • Sonat Inc., "Shareholder Rights Plan" (December 1, 1995)
  • Sonat Inc., "Annual Report" (1995)

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