Westinghouse Introduces "Poison Pill" to Thwart Takeover Attempts

Strategic Insights -

Pittsburgh-based Westinghouse Electric Corp., the new owner of CBS Inc., has introduced a shareholder rights plan, commonly referred to as a "poison pill," to prevent any potential takeover of the company. The plan aims to safeguard the interests of shareholders by issuing a dividend distribution of one right per common share held on January 9, 1996. The rights can be exercised if more than 15 percent of Westinghouse stock is acquired by one party, allowing holders to purchase Westinghouse preferred shares or shares in the acquiring entity at half of its market value. This move comes as some analysts have suggested Westinghouse might be a target due to its inexpensive stock and significant debt load accumulated during the CBS acquisition earlier this year.

Key Takeaways:

  • Westinghouse Electric Corp. has introduced a shareholder rights plan, or "poison pill," to prevent potential takeover attempts.
  • The plan is designed to safeguard the interests of shareholders by issuing a dividend distribution of one right per common share held on January 9, 1996.
  • The rights can be exercised if more than 15 percent of Westinghouse stock is acquired by one party, allowing holders to purchase Westinghouse preferred shares or shares in the acquiring entity at half of its market value.
  • The plan is similar to those adopted by several other companies, according to Westinghouse Chairman and CEO Michael Jordan.
  • Westinghouse will be entitled to redeem the rights at a value of $0.01 per right at any time until the 10th day following the acquisition of a 15 percent position in its voting stock.
  • The details of the new rights plan will be outlined in a letter to shareholders.
  • The plan is set to expire on January 9, 2006.

Statistics:

  • One right per common share will be distributed to shareholders on January 9, 1996.
  • More than 15 percent of Westinghouse stock must be acquired by one party for the rights to be exercised.
  • The rights entitle the holder to purchase Westinghouse preferred shares or shares in the acquiring entity at half of its market value.
  • The plan will be in effect until January 9, 2006.

Sources:

  • Westinghouse Electric Corp. (no specific publication date mentioned)