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Safeway Taking Steps to Halt Hostile Takeover with Poison Pill

Safeway Taking Steps to Halt Hostile Takeover with Poison Pill


PLEASANTON, CA
Safeway has become aware of an accumulation of a significant amount of the common stock of the company and in turn has adopted a one-year stockholder rights plan. This 'poison pill' has been introduced in an effort to prevent a hostile takeover. A "poison pill" allows the board to purchase shares at a discount, usually in the form of warrants or options, therefore diluting the hostile bidders' shares and discouraging them from buying more and moving forward with takeover attempts.

For an extended definition of a poison pill, click on the link below... Poison Pill

According to Reuters, Jana Partners LLC, a hedge-fund firm that presses for corporate change, acquired an approximately 6.2% position in Safeway. Jana representatives have discussed with Safeway management about shedding some unprofitable geographies and returning more capital to investors.

The report also states Safeway is working with investment bank Goldman Sachs Group Inc to defend the retailer against a takeover.

Safeway noted in a release that the Board of Directors believes that the rights plan will help promote the fair and equal treatment of all stockholders of the Company. The plan aka poison pill, will also ensure that the Board remains in the best position to discharge its fiduciary duties to the Company and its stockholders. One preferred stock purchase right will be distributed for each share of common stock held by stockholders of record on September 30, 2013 and 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 Company's 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% or more (15% or more in the case of a passive institutional investor) of the outstanding common stock, the company states. The rights will expire on September 15, 2014.

If a person or group acquires 10% or more of the outstanding common stock (15% or more in the case of a passive institutional investor) of Safeway, 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.

Reuters

Safeway

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